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 May June Total Budgeted sales (all on account) $330,000 $530,000 $210,000 $1,070,000 From past experience, the company has learned that 25% of a month’s sales are collected in the month of 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 $260,000, and March sales totaled $290,000. Required: 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. 2. What is the accounts receivable balance on June 30th?  

Answer 1

1) scheduled of expected Cash collection

	April	may	june	total
Feb sales	($260000×15%) 39000			$39000
March sales	(290000×60%) $174000	(290000×15%) $43500		$217500
April	($330000×25%) $82500	($330000×60%) $198000	($330000×15%) $49500	$330000
May		($530000×25%) $132500	($530000×60%) $318000	$450500
June			($210000×25%) $52500
Total Cash collection	$295500	$374000	$420000	$1089500

2) Accounts receivable on june,30th

= (15%of may) + (june × (60%+ 15%)

= $530000×15% + $210000×75%

= $79500 + $157500

= $237000

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