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)	$320,000	$520,000	$180,000	$1,020,000

From past experience, the company has learned that 30% of a month’s sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $250,000, and March sales totaled $280,000.

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

ANSWER=

(1)- SCHEDULE OF EXPECTED CASH COLLECTIONS

	April	May	June	Total
Febuary sales	$12500=($250000 x 5%)	-	-	$12500
March sales	$182000=($280000 x 65%)	$14000=($280000 x 5%)	-	$196000
April sales	$96000=($320000 x 30%)	$208000=($320000 x 65%)	$16000=($320000 x 5%)	$320000
May sales	-	$156000=($520000 x 30%)	$338000=($520000 x 65%)	$494000
June sales	-	-	$54000=($180000 x 30%)	$54000
Total Cash Collections	$290500	$378000	$408000	$1076500

(2)-Computation of Account receivable balance on june 30 is:-

= 5% of May sales + 70% of June sales

= ($520000 x 5%) + ($180000 x 70%)

= $26000 + $126000

=$152000-(Answer)