Silver Company makes a product that is very popular as a Mot

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 30

Solution

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