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) $460,000 $660,000 $210,000 $1,330,000 From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 20% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $390,000, and March sales totaled $420,000.

Required:
1.  
Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2.  
Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.

Exercise 8-1 Schedule of Expected Cash Collections [LO8-2]

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:

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 $340,000, and March sales totaled $370,000.

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?

QUESTION 4 [27 marks] Suppose the following quarterly earnings (in N$ millions) have been recorded by Namibia breweries company for the years 2007 to 2010. Year Quarter 2007 2008 2009 2010 1 52 57 60 66 2 67 90 77 82 3 27 75 84 98 4 45 71 63 76 4.1 Compute the 4-period centred moving average for the quarterly sales. [4] 4.2 Compute the seasonal indexes for these quarterly earnings. [10] 4.3 Use the method of least squares from regression analysis to determine the trend line of best fit. Use the zero-sum method for coding. [10] 4.4 Using the trend line you produced in 4.3, estimate the trend value of the time series for Quarter 3 in 2014. [3]

You are a designated accountant (CPA) working as the Controller for Orion Enterprises, a widely diversified company. As many publicly-traded companies do, Orion requires its senior managers to own shares in the company, as a condition of your employment.In your role as Controller, you are as a matter of course knowledgeable about the company’s performance, both forecast and actual. This morning, your senior accounting clerk prepared the draft financial statements for the current quarter. The preliminary net income for the quarter looks like it will be substantially larger than had been previously forecast. Because of this, you anticipate that the share price of the company will rise considerably when the quarterly results are released to the public.

Should you buy more shares in Orion Enterprises before the quarterly results are released to the public and the price increases? Provide at least four reasons for your action.

Which of the following observations appear to indicate market inefficiency? Explain whether the observation appears to contradict the weak, semi-strong, or strong efficiency.

1. a) Tax-exempt municipal bonds offer lower pretax returns than taxable government bonds
2. b) Managers make superior returns on their purchases of their company stock.
3. c) There is a positive relation between the return on the market in one quarter and the change in aggregate profits in the next quarter
4. d) There is evidence that stocks which have appreciated unusually in the recent past continue to do so in the future.
5. e) The stock of an acquired firm tends to appreciate in the period before the merger announcement.
6. f) Stocks of companies with unexpectedly high earnings appear to offer high returns for several months after the earnings announcement.
7. g) Very risky stocks on average give higher returns than safe stocks

Milford Company has the following sales projection (in units) for the next six months:
Feb: 2100
Mar: 2300
Apr: 1900
May: 2600
Jun: 2200
Jul: 1700

Each unit sells for $37 through April and $42 starting in May.

Milford has prepared the following sales budget for the quarter of April, May and June:

All of the sales are on credit. Cautious collects from customers as follows:
50% of sales in the month of sale
30% in the month following the sale, and
20% in the second month following the sale

Prepare a cash receipts budget for the quarter of April, May and June.

What is budgeted cash receipts May?