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.

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

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.

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

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

Silver Company
Schedule of Expected Cash Collection
	April	May	June	Total
February Sales	$380,000*15% = $57,000			$        57,000
March Sales	$410,000*60% = $246,000	$410,000*15% = $61,500		$     307,500
April Sales	$450,000*25% = $112,500	$450,000*60% = $270,000	$450,000*15% = $67,500	$     450,000
May Sales		$650,000*25% = $162,500	$650,000*60% = $390,000	$     552,500
June Sale			$250,000*25% = $62,500	$        62,500
Total Cash Collection	$                                   415,500	$                                   494,000	$                                   520,000	$ 1,429,500

Silver Company
Accounts Receiveble at June 30
May Sales	$650,000*15% = $97,500
June Sales	$250,000*75% = $187,500
Total Accounts Receiveble at June 30	$                                   285,000

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