Silver Company makes a product that is very popular as a Mother’s Day gift. Thus
ID: 2571646 • 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)
$500,000 $700,000 $240,000 $1,440,000
From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 20% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $430,000, and March sales totaled $460,000.
1.
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.
Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.
Explanation / Answer
1.
Silver Company
Schedule of Expected Cah Collections
April
May
June
Total
Collection from customers
- 20% of current month sales
($500,000*20%)
$ 100,000.00
($700,000*20%)
$ 140,000.00
($240,000*20%)
$ 48,000.00
$ 288,000.00
- 60% of previous month sales
($460,000*60%)
$ 276,000.00
($500,000*60%)
$ 300,000.00
($700,000*60%)
$ 420,000.00
$996,000.00
- 20% of second month preceding sales
($430000*20%)
$ 86,000.00
($460,000*20%)
$ 92,000.00
($500,000*20%)
$ 100,000.00
$ 278,000.00
Total
$ 462,000.00
$ 532,000.00
$ 568,000.00
$ 1,562,000.00
2.
Accounts receivable as n June 30 = 80% of June month sales + 20% of May month sales = ($240,000*0.80) + ($700,000*0.20) = $332,000
Silver Company
Schedule of Expected Cah Collections
April
May
June
Total
Collection from customers
- 20% of current month sales
($500,000*20%)
$ 100,000.00
($700,000*20%)
$ 140,000.00
($240,000*20%)
$ 48,000.00
$ 288,000.00
- 60% of previous month sales
($460,000*60%)
$ 276,000.00
($500,000*60%)
$ 300,000.00
($700,000*60%)
$ 420,000.00
$996,000.00
- 20% of second month preceding sales
($430000*20%)
$ 86,000.00
($460,000*20%)
$ 92,000.00
($500,000*20%)
$ 100,000.00
$ 278,000.00
Total
$ 462,000.00
$ 532,000.00
$ 568,000.00
$ 1,562,000.00
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