Silver Company makes a product that is very popular as a Mother\'s Day gift. Thu

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) $ 563,000 $ 838,000 $497,000 $ 1,898,000

From past experience, the company has learned that 25% of a month's sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $417,000, and March sales totaled $503,000.

Requirement 1:
Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

February sales April May June Total

March sales

April sales

May sales

June sales

Total cash collections



Requirement 2:
Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date,

Accounts receivable:

Explanation / Answer

February

March

April

May

June

$

$

$

$

$

Particulars February March April May June $ $ $ $ $ Actual sales 2,30,000.00 2,60,000.00 Budgeted sales 2,00,000.00 5,00,000.00 3,00,000.00 Sales collections February sales 46,000.00 1,61,000.00 23,000.00 March sales 52,000.00 1,82,000.00 26,000.00 April sales 40,000.00 1,40,000.00 20,000.00 May sales 1,00,000.00 3,50,000.00 June sales 60,000.00 Total Sales collection of each month 46,000.00 2,13,000.00 2,45,000.00 2,66,000.00 4,30,000.00 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 2,40,000.00 2,90,000.00

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