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)	$330,000	$530,000	$210,000	$1,070,000

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 $260,000, and March sales totaled $290,000.

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

Schedule of Expected Cash Collections
	April	May	June	Total
February Sales	$    39,000.00			$        39,000.00
March Sales	$ 174,000.00	$    43,500.00		$      217,500.00
April Sales	$    82,500.00	$ 198,000.00	$    49,500.00	$      330,000.00
May Sales		$ 132,500.00	$ 318,000.00	$      450,500.00
June Sales			$    52,500.00	$        52,500.00
Total Cash Collection	$ 295,500.00	$ 374,000.00	$ 420,000.00	$ 1,089,500.00

Accounts Receivables Balance
Balance of may sales	(15% of sale)	$    79,500.00
Balance of June Sale	(75% of sale)	$ 157,500.00
Total balance of Receivables at June 30th		$ 237,000.00