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) $440,000 $640,000 $220,000 $1,300,000 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 $370,000, and March sales totaled $400,000. 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)-

Siver Company
Schedule of Collections from sales
For the Three months ended 30 June
Particulars	April	May	June	Total
Credit Sales $	440000	640000	220000	1300000
Cash Collection
30% in month of sale	440000*30%=132000	640000*30%=192000	220000*30%=66000	390000
60% in following month of sale		440000*60%=264000	640000*60%=384000	648000
10% in the second month following sale			440000*10%=44000	44000
Total cash collections (c)	132000	456000	494000	1082000

2)-

Answer:- The accounts receivable balance on June 30th is= $218000

May sale receivable =$640000*10% =$64000

June sale receivable =$220000*70% =$154000