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 MayJune 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 folo ng s e, and the remain ng 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 Required: 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second le of Expected Cash Collections April Total February sales March sales April sales May sales June sales Total cash collections 0 S 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 MG 0124 ipg 0 FS 4

Explanation / Answer

Schedule of expected cash collections

86,000

(430,000*20%)

276,000

(460,000*60%)

92,000

(460,000*20%)

100,000

(500,000*20%)

300,000

(500,000*60%)

100,000

(500,000*20%)

140,000

(700,000*20%)

420,000

(700,000*60%)

48,000

(240,000*20%)

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2.

140,000

(700,000*20%)

192,000

(240,000*80%)

April May June Total February sales

86,000

(430,000*20%)

86,000 March sales

276,000

(460,000*60%)

92,000

(460,000*20%)

368,000 April sales

100,000

(500,000*20%)

300,000

(500,000*60%)

100,000

(500,000*20%)

500,000 May sales

140,000

(700,000*20%)

420,000

(700,000*60%)

560,000 June sales

48,000

(240,000*20%)

48,000 Total cash collections 462,000 532,000 568,000 1,562,000

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