Question

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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 $340,000 May $540,000 June $170,000 Budgeted sales (all on account) Total $1,050,000 From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 75% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $270,000, and March sales totaled $300,000. 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 $ 0 $ 0 $ 0 $ 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 $

Answer 1

Requirement: 1 Schedule of Expected cash colletion April May June February sales 13500 March sales 225000 15000 April Sales 68000 255000 17000 May Sales 108000 405000 June sales 34000 Total Cash Collections 306500 378000 456000 Total 13500 240000 340000 513000 34000 1140500 Requirement: 2 Silver Company Accounts Receivable at june 30: May sales $540,000 * 5% = June sales $170,000 * (75% +5%) = Total Accounts receivable at june 30 27000l 136000 163000