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:
AprilMayJuneTotal
Budgeted
sales (all on account) $390,000$590,000$230,000$1,210,000

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 sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $320,000, and March sales totaled $350,000.

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. Compute the accounts receivable as of that date,

1. The April collection will be from : 25% of April's sales + 60% of March's sales + 15% of February sales = 25% x 390K + 60% x 350K + 15% x 320K = $355,500;

The May collection will be from : 25% of May's sales + 60% of April's sales + 15% of March sales = 25% x 590K + 60% x 390K + 15% x 350K = $434,00

The June collection will be from : 25% of June's sales + 60% of May's sales + 15% of April sales = 25% x 230K + 60% x 590K + 15% x 390K = $470,000

2. The account receivable as at 30th June will include: 75% of June's sales + 15% of May's sales = 75% x 230K + 15% x 590K = $261,000

marvineetesh3 marvineetesh3 · Answer 2 · 2022-03-19T14:03:57+01:00

Cash collection schedule in Quarter 2 and the total cash collection given in the image below and the account receivable from sales as at 30th June is $261,000.

What is cash collection schedule?

The cash collections schedule considers every the cash anticipated to be obtained and does not consider the amount of the receivables approximated as uncollectible.

Computing the amount for cash collections schedule:

According to the given information,

April's cash collection:

[tex]=25\% \text{of April's Sales + 60\% of March's Sales + 15\% of February's Sales}\\\\=25\% \times 390,000 + 60\% \times 350,000 + 15\% \times 320,000\\\\= \$355,500[/tex]

May's cash collection:

[tex]=\text{25\% of May's Sales + 60\% of April's sales + 15\% of March's Sales}\\\\= 25\% \times 590,000 + 60\% \times 390,000 + 15\% \times 350,000\\\\=\$434,00[/tex]

June's cash collection:

[tex]=\text{25\% of June's Sales + 60\% of May's Sales + 15\% of April's Sales}\\\\=25\% x\times \$230,000 + 60\%\times \$590,000 + 15\% \times \$390,000\\\\=\$470,000[/tex]

Computation of the accounts receivable:

The account receivable as at 30th June will consider:

[tex]=\text{75\% of June's Sales + 15\% of May's Sales}\\\\ = 75\% \times \$230,000 + 15\% \times \$590,000\\\\ = \$261,000[/tex]

Therefore, The amount of accounts receivable is $261,000.

Learn more about the cash collection schedule, refer to:

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