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: Budgeted sales (all on account) April $360,000 May $560,000 June $220,000 Total $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? Complete this question by entering your answers in the tabs below.

Answer 1

• Requirement 1

	April	May	June	TOTAL
February Sales	$            29,000.00			$          29,000.00
March Sales	$          192,000.00	$           32,000.00		$        224,000.00
April Sales	$          108,000.00	$        216,000.00	$           36,000.00	$        360,000.00
May Sales		$        168,000.00	$        336,000.00	$        504,000.00
June Sales			$           66,000.00	$          66,000.00
Total Cash Collections	$          329,000.00	$        416,000.00	$        438,000.00	$    1,183,000.00

--Working

	April	May	June
February Sales	=290000*10%
March Sales	=320000*60%	=320000*10%
April Sales	=360000*30%	=360000*60%	=360000*10%
May Sales		=560000*30%	=560000*60%
June Sales			=220000*30%

• Requirement 2

Accounts receivables at June 30		Working
May Sales	$            56,000.00	[560000 x 10%]
June Sales	$          154,000.00	[220000 x 70%]
Total Accounts receivables	$          210,000.00