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) $360,000 $560,000 $220,000 $1,140,000 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 $290,000, and March sales totaled $320,000. 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	Silver Company
	Sales Budget
		$	$	$	$
		April	May	Jun	Total
	Expected sales	3,60,000	5,60,000	2,20,000	11,40,000
	Collection
	February sales collection	29,000			29,000
	March sales collection	1,92,000	32,000		2,24,000
	April sales Collection	1,08,000	2,16,000	36,000	3,60,000
	May Sales Collection	-	1,68,000	3,36,000	5,04,000
	Jun Sales Collection	-	-	66,000	66,000
	Total Collection	3,29,000	4,16,000	4,38,000	11,83,000
2	Accounts Receivables an 30th june
	May Sales UnCollected	56,000
	Jun Sales UnCollected	1,54,000
	Total Receivables	2,10,000