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)	$450,000	$650,000	$250,000	$1,350,000

From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 60% 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 $380,000, and March sales totaled $410,000.

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
FEB. SALES
MARCH SALES
APRIL SALES
MAY SALES
JUNE SALES
TOTAL CASH COLLECTIONS

2. What is the accounts receivable balance on June 30th?

Answer 1

Answer

• Requirement 1

Schedule of Expected Cash Collections
	April	May	June	Total
February sales	$57,000			$57,000
March sales	$246,000	$61,500		$307,500
April sales	$112,500	$270,000	$67,500	$450,000
May sales		$162,500	$390,000	$552,500
June sales			$62,500	$62,500
Total cash collections	$415,500	$494,000	$520,000	$1,429,500

--Working

	April	May	June
February sales	=380000*15%
March sales	=410000*60%	=410000*15%
April sales	=450000*25%	=450000*60%	=450000*15%
May sales		=650000*25%	=650000*60%
June sales			=250000*25%

• Requirement 2

Account receivables on June 30:
From May Sale (650000 x 15%)	$97,500
From June sale (250000 x 75%)	$187,500
Total = ANSWER	$285,000