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?

Answer 1

Feb	March
260000	290000		330000		530000		210000
	Silver Company
	Schedule of cash Receipt
	For April , May June
			April		May		June
	Cash Collection for :
	Current month sales	25	$82,500		$1,32,500		$52,500				$2,10,000
	Prior month sales	60	$1,74,000		$1,98,000		$3,18,000
	Prior month sales	15	$39,000		$43,500		$49,500		$2,17,500	$3,30,000	$5,30,000
	Expected cash receipts		$2,95,500		$3,74,000		$4,20,000
	Account receivable
	Current month sales						$1,57,500
	Prior month sales
	Prior month sales						$79,500
	Ending Account receivable						$2,37,000