Question

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak...

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) $370,000 $570,000 $180,000 $1,120,000

From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $300,000, and March sales totaled $330,000.

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?

Homework Answers

Answer #1

1.

Particulars April May June Total
Collection from February sales ($300,000*10%) 30000 30000
Collection from March sales ($330,000*65%), ($330,000*10%) 214500 33000 247500
Collection from April sales 92500 240500 37000 370000
Collection from May sales 142500 370500 513000
Collection from June sales 45000 45000
Expected cash collections from sales $337,000 $416,000 $452,500 $1,205,500

2. Accounts receivable balance on June 30th = May sales x 10% + June Sales *75%

=570000*10%+180000*75%

= $192,000

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