Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur...

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, ad shown in the company’s sales budget for the second quarter given below:

From past experience, the company has learned that 20% of month’s sales are collected in the month of sale, another 70% 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 $230,000, and March sales totaled $260,000.
Required:
1: Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.
2:Assume that the company will prepare a budgeted balance sheet as of June 30. Compare the accounts receivable as of thatdate.

David · Accepted Answer

1) Schedule of expected cash collections are reported as 
 
 
Cash collections for April : 
20% of sales reported in the same month = 20% of $300,000 
                                                            = $60,000 
10% of Feb sales + 70% of Mar sales = $23,000 + $182,000 
                                                  = $205,000 
Total cash collections = $60,000 + $205,000 = $265,000 
Cash collections for May: 
20% of $500,000 = $100,

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, ad shown in the company’s sales budget for the second quarter given below: From...

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