Silver Company makes a product that is very popular as a Mother\'s Day gift. Thu
ID: 2604930 • 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: Total $980,000 April May S310,000 510,000 $160,000 June Budgeted sales (all on account) From past experience, the company has learned that 25% of a month's sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $240,000, and March sales totaled $270,000 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 30Explanation / Answer
Answer
Actual
Budgeted
Months
February
March
April
May
June
Sales
240000
270000
310000
510000
160000
25%
60000
67500
77500
127500
40000
60%
144000
162000
186000
306000
96000
15%
36000
40500
46500
76500
24000
April
May
June
Total
February Sales
36000
0
0
36000
March sales
162000
40500
0
202500
April Sales
77500
186000
46500
310000
May Sales
0
127500
306000
433500
June Sales
0
0
40000
40000
Total cash collections
275500
354000
392500
1022000
February
March
TOTAL
Opening Receivables
[15%] 36000
[75%] 202500
238500
Total Sales budgeted [April to June]
980000
(-)Total cash collected [in Requirement 1]
1022000
Closing Receivables balance at June 30
196500
May Sales [15% of May budgeted sales]
76500
June Sales [60% + 15% of June Budgeted Sales]
120000
Total accounts receivables at June 30
196500 [same as calculated in above working]
Actual
Budgeted
Months
February
March
April
May
June
Sales
240000
270000
310000
510000
160000
25%
60000
67500
77500
127500
40000
60%
144000
162000
186000
306000
96000
15%
36000
40500
46500
76500
24000
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