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: From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 20% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $310,000, and March sales totaled $340,000. 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 recelvable balance on June 30 th? Complete this question by entering your answers in the tabs below. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

Answer 1

The expected cash collections schedule for Silver Company is compiled by calculating percentages of sales collected in each month based on the company's policies. February and March sales also contribute to the second-quarter collections. The accounts receivable balance on June 30th considers uncollected June sales and remaining amounts from May.

Step-by-step explanation:

Schedule of Expected Cash Collections

To prepare the schedule of expected cash collections from sales for Silver Company, use the percentage break-down given to determine collections for each month in the second quarter:

• April sales: Assume the question provides the April sales amount. Calculate 20% collected in April, 60% in May, and 20% in June.
• May sales: The bulk of sales occur, so 20% is collected in May, 60% in June, and 20% in July (which isn't needed for this quarter's schedule).
• June sales: Only 20% is collected within the month, with the rest being collected in the following quarter.

You need to also consider the collections from the preceding months:

• February sales: $310,000 with 20% collected in April.
• March sales: $340,000 with 60% collected in April and 20% in May.

Summary of collections:

1. April's total collection = 20% of March sales + 20% of February sales + 20% of April sales.
2. May's total collection = 60% of April sales + 20% of March sales.
3. June's total collection = 20% of May sales + 60% of April sales.