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) $370,000 $570,000 $180,000 $1,120,000 From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $300,000, and March sales totaled $330,000. 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

1	Schedule of Expected Cash Collections
		April	May	June	Total
	February sales	30,000	-	-	30,000
	March sales	214,500	33,000	-	247,500
	April sales	92,500	240,500	37,000	370,000
	May sales	-	142,500	370,500	513,000
	June sales	-	-	45,000	45,000
	Total cash collection	337,000	416,000	452,500	1,205,500
2	Total accounts receivable on June 30th		192,000
	May sales	57,000	(570,000*10%)
	June sales	135,000	(180,000*75%)
		192,000
	Working
		April	May	June
	February sales	(300,000*10%)	-	-
	March sales	(330,000*65%)	(330,000*60%)	-
	April sales	(370,000*25%)	(370,000*65%)	(370,000*10%)
	May sales	-	(570,000*25%)	(570,000*65%)
	June sales	-	-	(180,000*25%)