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)

$420,000 $620,000 $240,000 $1,280,000

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $350,000, and March sales totaled $380,000.

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