Problem 459397076.

xlsx Page 1 of 2

Schedule of Expected Cash Collections

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

Projected sales $300,000 $500,000 $200,000 $1,000,000

The company collects 20% of a month's sales - 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.
Compute the accounts receivable as of that date.

1. Projected Collections - April, May and June

April May June Total
February sales $230,000 10% $23,000 $23,000
March sales $260,000 70%, 10%
April sales $300,000 20%, 70%, 10%
May sales $500,000 20%, 70%
June sales $200,000 20%
Total cash collections

Observe that even though sales peak in May, cash collections peak in June.
This occurs because the bulk of the company’s customers pay in month following sale.
The lag in collections that this creates is even more pronounced in some companies.
Indeed, it is not unusual for a company to have the least cash available
in the months when sales are greatest.

2. Accounts receivable at June 30:

From May sales: $500,000 × 10%
From June sales: $200,000 × (70% + 10%)
Total accounts receivable at June 30
Solution 459397076.xlsx Page 2 of 2

Schedule of Expected Cash Collections

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

Projected sales $300,000 $500,000 $200,000 $1,000,000

The company collects 20% of a month's sales - 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.
Compute the accounts receivable as of that date.

1. Projected Collections - April, May and June

April May June Total
February sales $230,000 10% $23,000 $23,000
March sales $260,000 70%, 10% $182,000 $26,000 $208,000
April sales $300,000 20%, 70%, 10% 60,000 210,000 30,000 300,000
May sales $500,000 20%, 70% 100,000 350,000 450,000
June sales $200,000 20% 40,000 40,000
Total cash collections $265,000 $336,000 $420,000 $1,021,000

Observe that even though sales peak in May, cash collections peak in June.
This occurs because the bulk of the company’s customers pay in month following sale.
The lag in collections that this creates is even more pronounced in some companies.
Indeed, it is not unusual for a company to have the least cash available
in the months when sales are greatest.

2. Accounts receivable at June 30:

From May sales: $500,000 × 10% 50,000
From June sales: $200,000 × (70% + 10%) 160,000
Total accounts receivable at June 30 $210,000