Exercise 8-1 Schedule of Expected Cash Collections [LO8-2] Silver Company makes

Question

Exercise 8-1 Schedule of Expected Cash Collections [LO8-2] Silver Company makes a product that is very popular as a Mothe?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 June Total $1,020,000 April May $320,000 $520,000 $180,000 Budgeted sales (all on account) From past experience, the company has learned that 30% of a month's sales are collected in the month of sale, another 65% 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 $250,000, and March sales totaled $280,000 Required 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter Schedule of Expected Cash Collections April May June Total February sales March sales April sales May sales June sales Total cash collections 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 June sales Total accounts receivable at June 30

Explanation / Answer

1 April May June Total February sales 12500 12500 March sales 182000 14000 196000 April sales 96000 208000 16000 320000 May sales 156000 338000 494000 June sales 54000 54000 Total cash collections 290500 378000 408000 1076500 2 May sales 26000 =520000*5% June sales 126000 =180000*70% Total accounts Receivable June 30 152000

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