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)	$390,000	$590,000	$230,000	$1,210,000

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 $320,000, and March sales totaled $350,000.

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

1.statement showing expected cash flows from sales month wise and intotal

PARTICULARS	Feb	March	April	May	June	July	August	Total cash collections for all the months
For sales of 320000 made in February the collection will be as follows 320000*25% will be collected in feb 320000*60% will be collected in March 320000*15% will be collected in April
80000	192000	48000
For sales of 350000 made in March the collection will be as follows 350000*25% will be collected in march 350000*60% will be collected in april 350000*15% will be collected in may
	87500	210000	52500
For sales of 390000 made in April the collection will be as follows 390000*25% will be collected in april 390000*60% will be collected in May 390000*15% will be collected in June
		97500	234000	58500
For sales of 590000 made in may the collection will be as follows 590000*25% will be collected in may 590000*60% will be collected in june 590000*15% will be collected in July
			147500	354000	88500
For sales of 230000 made in june the collection will be as follows 230000*25% will be collected in June 230000*60% will be collected in July 230000*15% will be collected in August
				57500	138000	34500
Total expected cash collections from sales for each month	80000	279500	355500	434000	470000	226500	34500	1880000

Refernce sheet is as follows:

2. Accounts recievable as on june 30 will be sum of recievables in july and august=$236500(july)+$34500(august)=$261000

Statement showing expected cash collections from sales by month & in total PARTICULARS March April T June July | August August Total cash collections for all the months = 320000'25% = 320000"60% - 320000015% - 350000'25% - 350000'60% - 350000'15% For sales of 320000 made in February the collection will be as follows 320000'25% will be collected in feb 320000'60% will be collected in March 320000*15% will be collected in April For sales of 350000 made in March the collection will be as follows 350000'25% will be collected in march 350000"60% will be collected in april 350000*15% will be collected in may For sales of 390000 made in April the collection will be as follows 390000'25% will be collected in april

---

ekkarill92