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: April May June Total Budgeted sales (all on account) $360,000 $560,000 $220,000 $1,140,000 From past experience, the company has learned that 30% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $290,000, and March sales totaled $320,000. Required: 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. 2. What is the accounts receivable balance on June 30th?

Explanation / Answer

1 Silver Company Sales Budget $ $ $ $ April May Jun Total Expected sales            3,60,000              5,60,000            2,20,000          11,40,000 Collection February sales collection                29,000                29,000 March sales collection            1,92,000                  32,000            2,24,000 April sales Collection            1,08,000              2,16,000                36,000            3,60,000 May Sales Collection                         -                1,68,000            3,36,000            5,04,000 Jun Sales Collection                         -                             -                  66,000                66,000 Total Collection            3,29,000              4,16,000            4,38,000          11,83,000 2 Accounts Receivables an 30th june May Sales UnCollected                56,000 Jun Sales UnCollected            1,54,000 Total Receivables            2,10,000

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