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)	$490,000	$690,000	$220,000	$1,400,000

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 $420,000, and March sales totaled $450,000.

Answer 1

Requirement - 1 Schedule of Expected Cash Collections

SILVER COMPANY
Schedule of Expected Cash Collections
	April	May	June	Total
February sales	63,000	-	-	63,000
March sales	270,000	67,500	-	337,500
April sales	122,500	294,000	73,500	490,000
May sales	-	172,500	414,000	586,500
June sales	-	-	55,000	55,000
Total cash collections	455,500	534,000	542,500	1,532,000

Requirement - 2

SILVER COMPANY
Accounts Receivable as at June 30
May Sales [ 690,000 x 0.15 ]	103,500
June Sales [ 220,000 x 0.75 ]	165,000
Total Accounts Receivable as at June 30	268,500