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)	$310,000	$510,000	$160,000	$980,000

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 $240,000, and March sales totaled $270,000.

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.

• Required 1
• Required 2

What is the accounts receivable balance on June 30th?

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

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

	Schedule of Expected Cash Collections April May June Total February sales $0 March sales 0 April sales 0 May sales 0 June sales 0 Total cash collections $0 $0 $0 $0

	Total accounts receivable at June 30

Answer 1

I have prepared Silver Company Schedule of Cash Collections and Accounts Receivable balance as on 30 June as required

Every month's sales is collected as follows: 25% of collections in the month of sales

60% of collections in the following month of sales

15% of collection in the second month of the following sales.

I have shown the collections of every month's sale in the working.

A DE K L M N O 3 1. Schedule of expected cash collections from sale by month and in total 2. Accounts Receivable Balance as on 30 June: 5 April May June Total May Sales 76500 (15% of sales receivable in July) 6 Febraury Sales 360000 0 36000 June Sales 120000 (60% & 15% of sales receivable in July & August respectively) 7 March Sales 162000 40500 0 202500 Accounts Receivable 196500 8 April Sales 77500 18600046500 310000 Balance as on 30th June 9 May Sales 0 127500 306000 433500 10 June Sales 0 40000 40000 11 Total Cash Collections 275500 354000392500 1022000 12 13 Workings: 14 Note: Cash collected 25% in the month of sale, 60% following the month of sale & 15% in the second month following the sale 15 16 25% 60% 15% 25% 60% 15% 17 in Feb in March in April in May in June in July Febrauary Sales of $ 18 240000 60000 144000 36000 May Sales of $510000 127500 306000 76500 19 20 in March 67500 in April Jin May 162000 40500 in June Jin July in August 40000 96000 24000 21 March Sales of $ 270000 June Sales of $150000 22 23 in April in May Jin June 77500 186000 46500 24 April Sales of $310000 25 26