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) $410,000 $610,000 $210,000 $1,230,000
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 the sale, and the remaining 15% are collected In the second month following sale. Bad debts are negligible and can be ignored. February sales totaled 5340.000, and March sales totaled $370.000.
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?

Answer 1

To prepare a schedule of expected cash collections from sales for the second quarter, we need to determine the expected cash collection for each month based on the budgeted sales and collection percentages. The total expected cash collections for the second quarter will be $500,000. The accounts receivable balance on June 30th will be $178,500.

Step-by-step explanation:

To prepare a schedule of expected cash collections from sales for the second quarter, we need to determine the expected cash collection for each month based on the budgeted sales and collection percentages.

In April, 25% of the April sales ($410,000) will be collected, which is $102,500. In May, 60% of the May sales ($610,000) will be collected, which is $366,000. In June, 15% of the June sales ($210,000) will be collected, which is $31,500.

The total expected cash collections for the second quarter will be $102,500 + $366,000 + $31,500 = $500,000.

To calculate the accounts receivable balance on June 30th, we need to subtract the cash collected from the total sales for June. In June, $31,500 will be collected, so the accounts receivable balance on June 30th will be $210,000 - $31,500 = $178,500.

Answer 2

To prepare a schedule of expected cash collections from sales for the second quarter, calculate the cash collections for each month based on the given information. The cash collections for April, May, and June are $102,500, $518,500, and $397,500 respectively. The total expected cash collection for the second quarter is $1,018,500.

Step-by-step explanation:

To prepare a schedule of expected cash collections from sales for the second quarter, we need to calculate the cash collections for each month based on the given information. First, we calculate the cash collections for May, which is 25% of May sales. This is 25% of $610,000, which is $152,500. Next, we calculate the cash collections for June, which is 60% of May sales. This is 60% of $610,000, which is $366,000. Finally, we calculate the cash collections for July, which is 15% of May sales. This is 15% of $610,000, which is $91,500.

So, the schedule of expected cash collections from sales for the second quarter is as follows:

April: $410,000 x 0.25 = $102,500

May: $610,000 x 0.25 + $610,000 x 0.60 = $152,500 + $366,000 = $518,500

June: $610,000 x 0.60 + $210,000 x 0.15 = $366,000 + $31,500 = $397,500

Total: $102,500 + $518,500 + $397,500 = $1,018,500