Silver Company makes a product that is very popular as a Mother’s Day gift. Thus
ID: 2424051 • Letter: S
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:
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 $420,000, and March sales totaled $450,000.
Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.
Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.
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:
Explanation / Answer
Expected cash collection :
April :
February (15% of 420,000) = $63000
March (60% of 450000) = $270000
April (25% of 490000)= $122500
Total = $455500
May :
March (15% of 450000) = $67500
April (60% of 490000) = $294000
May (25% of 690000) = $172500
Total = $534000
June :
April (15% of 490000)= $73500
May (60% of 690000)= $414000
June (25% of 220000)= $55000
Total = $542500
expected cash collection on june = $542500
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