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) $400,000 $600,000 $190,000 $1,190,000

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 $330,000, and March sales totaled $360,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

Schedule of Expected Cash Collections
April May June Total
February sales
March sales
April sales
May sales
June sales
Total cash collections

2. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.

May sales
June sales
Total accounts receivable at June 30

Homework Answers

Answer #1
Feb Mar April May June Total
Budgeted Sales 330000 360000 400000 600000 190000 1190000
Schedule of Expected Cash Collections
April May June Total
February sales 33000 33000
March sales 216000 36000 252000
April sales 120000 240000 40000 400000
May sales 180000 360000 540000
June sales 57000 57000
Total cash collections 369000 456000 457000 1282000
May Sales 60000 (600000*10%)
June Sales 133000 (190000*70%)
Total Account Receivables at Jun 30 193000
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