Question

Silver Company makes a product that is very popular as a Mother's Day qgift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below Total April $320 000 May $520,000 June $1,020,000 $180 000 Budgeted sales (all on account) From past experience, the company has learmed that 30 % of a month's sales are collected in the month of sale, another 65 % are collected in the month following sale, and the remaining 5% are collected in the second month following sale Bad debts are negligible and can be ignored February sales totaled $250,000, and March sales totaled $280 ,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 May Total June April February sales March sales April sales May sales June sales Total cash collections

Answer 1

	April	May	June	Total
February Sales	250,000 x 5% = 12,500	0	0	12,500
March Sales	280,000 x 65% = 182,000	280,000 x 5% = 14,000	0	196,000
April Sales	320,000 x 30% = 96,000	320,000 x 65% =208,000	320,000 x 5% = 16,000	320,000
May Sales	0	520,000 x 30% = 156,000	520,000 x 65% = 338,000	494,000
June Sales	0	0	180,000 x 30% = 54,000	54,000
Total Cash Collection	$290,500	$378,000	$408,000	$1,076,500

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