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 $380,000 May $580,000 June Total $200,000 $1,160,000 Budgeted sales (all on account) 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 $310,000, and March sales totaled $340,000. Required: 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter Silver Company Schedule of Expected Cash Collections April May June Total February sales March sales April sales May sales June sales Total cash collections

Answer 1

Answer

• [1]

	April	May	June	Total
February sales	$62,000			$62,000
March sales	$204,000	$68,000		$272,000
April sales	$76,000	$228,000	$76,000	$380,000
May sales		$116,000	$348,000	$464,000
June sales			$40,000	$40,000
Total cash collections	$342,000	$412,000	$464,000	$1,218,000

--Working

	April	May	June
February sales	=310000*20%
March sales	=340000*60%	=340000*20%
April sales	=380000*20%	=380000*60%	=380000*20%
May sales		=580000*20%	=580000*60%
June sales			=200000*20%

• [2]

Account receivables on June 30:
From May Sale (580000 x 20%)	$116,000
From June sale (200000 x 80%)	$160,000
Total = ANSWER	$276,000