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) $480,000 $680,000 $260,000 $1,420,000 From past experience, the company has learned that 30% of a month’s sales are collected in the month of sale, another 60% 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 $410,000, and March sales totaled $440,000. 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)			Schedule of Expected Cash Collection
					April	May	June	Total
February sales		(410,000*10%)			41000			41000
March sales		(440,000*60%;10%)			264000	44000		308000
April Sales		(480,000*30%;60%;10%)			144000	288000	48000	480000
May sales		(680,000*30%;60%)				204000	408000	612000
June sales		(260,000*30%)					78000	78000
Total cash collection					449000	536000	534000	1519000
2)		May sales	(680,000*10%)=			68000
		June	(260,000*70%)=			182000
		Account receivable on June 30th				250000