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 $440,000 May $640,000 June $220,000 Total $1,300,000 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 $370,000, and March sales totaled $400,000. 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 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 $ 0 February sales March sales 0 0 April sales May sales June sales Total cash collections Ooo $ 0 $ 0 $ 0 $

Answer 1

Solution :

(1) Estimated Collection :

	April	May	June	Total
February Sales	$ 37,000	-	-	$ 37,000
March Sales	$ 240,000	$ 40,000	-	$ 280,000
Arpril Sales	$ 132,000	$ 264,000	$ 44,000	$ 440,000
May Sales	-	$ 192,000	$ 384,000	$ 576,000
June Sales	-	-	$ 66,000	$ 66,000
Total Cash Collection	$ 409,000	$ 496,000	$ 494,000	$ 1,399,000

(2) Account Receivable Balance on June 30 :

Account Receivable Balance on June 30

$ 218,000

Working :

(1) Estimated Collection :

	April	May	June	Total
February Sales	$ 370,000 * 10% = $ 37,000	-	-	$ 37,000
March Sales	$ 400,000 * 60% = $ 240,000	$ 400,000 * 10% = $ 40,000	-	$ 280,000
Arpril Sales	$ 440,000 * 30% = $ 132,000	$ 440,000 * 60% = $ 264,000	$ 440,000 * 30% = $ 44,000	$ 440,000
May Sales	-	$ 640,000 * 30% = $ 192,000	$ 640,000 * 60% = $ 384,000	$ 576,000
June Sales	-	-	$ 220,000 * 30% = $ 66,000	$ 66,000
Total Cash Collection	$ 409,000	$ 496,000	$ 494,000	$ 1,399,000

(2) Account Receivable Balance :

	Working	Account Recivable Balance
May	$ 640,000 * 10%	$ 64,000
June	$ 220,000 * 70%	$ 154,000
Balance on 30 June	$ 218,000

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