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)	$410,000	$610,000	$210,000	$1,230,000

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 $340,000, and March sales totaled $370,000.

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?

Answer 1

Answer
1.
Particulars	April	May	June	Total
February sales	$         51,000	-	-	$     51,000
	(340000*15%)
March sales	$      2,22,000	$         55,500	-	$ 2,77,500
	(370000*60%)	(370000*15%)
April sales	$      1,02,500	$      2,46,000	$         61,500	$ 4,10,000
	(410000*25%)	(410000*60%)	(410000*15%)
May sales	-	$      1,52,500	$      3,66,000	$ 5,18,500
		(610000*25%)	(610000*60%)
June sales	-	-	$         52,500	$     52,500
			(210000*25%)
Total cash collections	$      3,75,500	$      4,54,000	$      4,80,000	$13,09,500

2.

Calculation of Accounts receivable:
May (610000*15%)		$   91,500
June (210000*60%) + (210000*15%)		$1,57,500
Total accounts receivable		$2,49,000