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)	$360,000	$560,000	$220,000	$1,140,000

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 $290,000, and March sales totaled $320,000.

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?

• 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				0
April sales				0
May sales				0
June sales				0
Total cash collections	$0	$0	$0	$0

What is the accounts receivable balance on June 30th?

Total accounts receivable at June 30

Answer 1