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 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.

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.

May Sales

June Sales

Total Accounts Receivable at June 30

     

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

Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

Compute account receivable :

Silver Company Schedule of Expected Cash Collections April May June Total February sales 430000*20%=86000 86000 March sales 460000*60%=276000 460000*20%=92000 368000 April sales 500000*20%=100000 500000*60%=300000 500000*20%=100000 500000 May sales 700000*20%=140000 700000*60%=420000 560000 June sales 240000*20%=48000 48000 Total cash collections 462000 532000 568000 1562000

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