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)	$300,000	$500,000	$200,000	$1,000,000

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 70% 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 $230,000, and March sales totaled $260,000.

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?

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

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				$0
March sales	182,000			182,000
April sales				0
May sales				0
June sales				0
Total cash collections	$182,000	$0	$0	$182,000

Answer 1

Solution:

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

Working:

2. Calculation of accounts receivable balance on June 30th