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 $380,000 May $580,000 June $200,000 Total $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. 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

1)			Schedule of Expected Cash Collection
					April	May	June	Total
February sales		(310,000*20%)			62000			62000
March sales		(340,000*60%;20%)			204000	68000		272000
April Sales		(380,000*20%;60%;20%)			76000	228000	76000	380000
May sales		(580,000*20%;60%)				116000	348000	464000
June sales		(200,000*20%)					40000	40000
Total cash collection					342000	412000	464000	1218000
2)		May sales	(580,000*20%)=			116000
		June	(200,000*80%)=			160000
		Account receivable on June 30th				276000