EXERCISE8-1 Schedule of Expected Cash Collections Silver Company makes a product

Question

EXERCISE8-1 Schedule of Expected Cash Collections
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 May June Total
$300,000 $500,000 $200,000 $1,000,000
From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 70% 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 $230,000, and March sales totaled $260,000.

Required:
1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.
2. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.

Explanation / Answer

February

March

April

May

June

$

$

$

$

$

Particulars

February

March

April

May

June

$

$

$

$

$

Actual sales 230,000.00 260,000.00 Budgeted sales 200,000.00 500,000.00 300,000.00 Sales collections February sales 46,000.00 161,000.00 23,000.00 March sales 52,000.00 182,000.00 26,000.00 April sales 40,000.00 140,000.00 20,000.00 May sales 100,000.00 350,000.00 June sales 60,000.00 Total Sales collection of each month 46,000.00 213,000.00 245,000.00 266,000.00 430,000.00 Note: Sales collection in that month20%, 70%next month and the balance in the second month Balance sheet on 30 june Accounts receivables 10% of May sales tobe received in June 50,000.00 80% sales of june 240,000.00 290,000.00

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