Silver Company makes a product that is very popular as a Mother\'s Day gift. Thu

Question

Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below: April $490,000 S690,000 $220,000 $1,400,000 May Total Budgeted sales (all on account) From past experience, the company has learned that 25% or a month's sales are collected in the month or sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $420,000, and March sales totaled $450,000 Required 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter Schedule of Expected Cash Collections April May June Total February sales March sales April sales May sales June sales Total cash collections 2. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date. May sales June sales Total accounts receivable at June 30 S

Explanation / Answer

1. SCHEDULE OF EXPECTED CASH COLLECTIONS

2. Accounts Receivable as at June 30:

APRIL MAY JUNE TOTAL FEBRUARY SALES 420,000*15/100 = 63,000 NIL NIL 63,000 MARCH SALES 450,000*60/100 = 270,000 450,000*15/100 = 67,500 NIL 337,500 APRIL SALES 490,000*25/100 = 122,500 490,000*60/100 = 294,000 490,000*15/100 = 73,500 490,000 MAY SALES NIL 690,000*25/100 = 172,500 690,000*60/100 = 414,000 586,500 JUNE SALES NIL NIL 220,000*25/100 = 55,000 55,000 TOTAL CASH COLLECTIONS 455,500 534,000 542,500 1,532,000

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