Silver Company makes a product that is very popular as a Mother\'s Day gift. Thu
ID: 2443216 • 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:
April May June Total
Budgeted sales (all on account) $ 579,634 $ 883,000 $492,000 $ 1,954,634
From past experience, the company has learned that 15% of a month's sales are collected in the month of sale, another 75% 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 $431,000, and March sales totaled $504,366.
Requirement 1:
Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. (Round your answer to the nearest dollar amount. Enter zero where required).
Requirement 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
Requirement 1:
Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. (Round your answer to the nearest dollar amount. Enter zero where required).
Schedule of Cash Collection
April May June Total
February Sales
$431,000 x 10% $43,100 - - $43,100
March Sales
$504,366 x 75% $378,275 $50,437 - $428,712
$504,366 x 10%
April Sales
$579,634 x 15% $86,945 $434,726 $57,963 $579,634
$579,634 x 75%
$579,634 x 10%
May Sales
$883,000 x 15% $132,450 $662,250 $794,700
$883,000 x 75%
June Sales
$492,000 x15% - - $73,800 $73,800
_________________________________________________
Total $508,320 $617,613 $794,013 $1,919,946
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Requirement 2:
Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.
May Sales $883,000 x 10% $88,300
June Sales $492,000 x 75% $369,000
$492,000 x 10% $49,200 $418,200
Total A/R as on June 30 $506,500
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