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
	April	May	June	Total
February Sales	39000			39000
March sales	174000	43500		217500
April sales	82500	198000	49500	330000
May sales		132500	318000	450500
June sales			52500	52500
Total cash collections	295500	374000	420000	1089500
2
May sales uncollected	79500	=530000*15%
June sales uncollected	157500	=210000*75%
Accounts Receivable at June 30	237000

Workings:
	April	May	June
February Sales	=260000*15%
March sales	=290000*60%	=290000*15%
April sales	=330000*25%	=330000*60%	=330000*15%
May sales		=530000*25%	=530000*60%
June sales			=210000*25%