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: Budgeted sales (all on account) April $340,000 May $540,000 June $170,000 Total $1,050,000 From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 75% 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 $270,000, and March sales totaled $300,000. 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 ol February sales February sales March sales March sales April sales May sales June sales Total cash collections $ $ $ $ 0 2. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date. Silver Company Accounts receivable at June 30 May sales June sales Total accounts receivable at June 30 $

Explanation / Answer

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Silver company Schedule of expected cash collection April May June Total February Sales $270,000 x 5% = 13,500 13,500 March sales $300,000 x 75% = 225,000 $300,000 x 5% = 15,000 240,000 April sales $340,000 x 20% = 68,000 $340,000 x 75% = 255,000 $340,000 x 5% = 170,000 493,000 May sales $540,000 x 20% = 108,000 $340,000 x 75% = 405,000 513,000 June sales $170,000 x 20% = 34,000 34,000 Total cash collections $306,500 $378,000 $609,000 $1,293,500

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