Silver Company makes a product that is very popular as a Mother’s Day gift. Thus

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 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 $280,000, and March sales totaled $310,000.

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 COLLECTIONS April may June Quarter Feb month sales 14,000 14,000 march month sales 217,000 15500 232,500 April month sales 87500 245000 17500 350,000 May month sales 137,500 385,000 522,500 June sales month 47500 47,500 Total Cash Collections 318,500 398,000 450,000 1,166,500 Accounts receivable At the end: May sales receivable (550,000*5%) 27500 June Ssales receivable (190,000*75%) 142500 Total Accounts receivable 170,000

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