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)	$480,000	$680,000	$260,000	$1,420,000

From past experience, the company has learned that 30% of a month’s sales are collected in the month of sale, another 60% 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 $410,000, and March sales totaled $440,000.

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

	April	May	June	Total
Total Sales	480,000	680,000	260,000	1,420,000
Schedule of Expected Cash Collection
	April	May	June	Total
February Sales	41,000			41,000
March sales	264,000	44,000		308,000
April Sales	144,000	288,000	48,000	480,000
May Sales		204,000	408,000	612,000
June Sales			78,000	78,000
Total cash collection	449,000	536,000	534,000	1,519,000
Accounts Receivable balance, June 30
Out of MAY SALES	68,000
Out of June Sales	182,000
Total Accounts receivable as on June 30	250,000