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) $380,000 $580,000 $200,000 $1,160,000 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 $310,000, and March sales totaled $340,000 2010 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 cer 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 March sales |April sales May sales June Sales Total cash collections wed Required 2 >

Answer 1

Answer to Question 1 and 2:

Question 1 Expected Cash Collections April May June Total February Sales $ 62,000 $ $ $ 62,000 Calculation (310,000 X 20%) March Sales $ 204,000 $ 68,000 $ $ 272,000 Calculation (340,000 X 60%) (340,000 X 20%) April Sales $ 76,000 $ 228,000 $ 76,000 $ 380,000 Calculation (380,000 X 20%) (380,000 X 60%) (380,000 X 20%) May Sales $ $ 116,000 $ 348,000 $ 464,000 Calculation (580,000 X 20%) (580,000 X 60%) June Sales $ 40,000 $ 40,000 Calculation (200,000 X 20%) Total cash receipt $ 342,000 $ 412,000 $ 464,000 $ 1,218,000 (62,000 + 204,000 (68,000 + 228,000 (76,000 + 348,000 Calculation + 76,000) + 116,000) +40,000) Question 2 Accounts Receivable Balance on 30th June = $276,000 Breakup is as follows: June Balance $ 160,000 (200,000 X 80%) (We only collected 20%, so 80% still remains to be collected) May Balance $ 116,000 (580,000 X 20%) (We only collected 80%, so 20% still remains to be collected) Total $ 276,000