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:

     From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 65% 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 $400,000, and March sales totaled $430,000.

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.

     

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:

Solution

Requirement 1 Schedule of Cash collections for the second Quarter Sales April May June Total Collection against Feburary Sales    400,000 40,000          40,000 (400,000*10%) Collection against March Sales    430,000 279,500 43000       322,500 (430,000*65%) (430,000*10%) Collection against April Sales    470,000 117500 305500 47000       470,000 (470,000*25%) (430,000*65%) (430,000*10%) Collection against May Sales    670,000 167500 435500       603,000 (670,000*25%) (670,000*65%) Collection against June Sales    230,000 57500          57,500 (230,000*25%) Total Collections 437,000 516,000 540,000    1,493,000 Requirement 2 Accounts receivable as of June 30 Accounts Receivable against May sales (670,000-603,000) 67,000 Accounts Receivable against May sales (230000-57500) 172,500 Accounts receivable as of June 30 239,500