Part of the 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) $310,000 $510,000 $160,000 $980,00
Answer:
1. A Schedule of Expected Cash Collections from Sales:
April May June Total for the
Quarter
25% sales month $77,500 $127,500 $40,000 $245,000
60% 2nd month 222,000 186,000 306,000 714,000
15% 3rd month 51,000 55,500 46,500 153,000
Total cash collections $350,500 $369,000 $392,500 $1,112,000
2. Accounts Receivable balance on June 30th:
Total beginning balance $328,500
Total quarter sales $980,000
Total due from customers $1,308,500
Cash receipts for quarter $1,112,000
Balance on June 30th $196,500
Explanation:
a) Data and Calculations:
Feb. Mar. April May June Total for the
Quarter
Sales $340,000 $370,000 $310,000 $510,000 $160,000 $980,00
Cash:
25% sales month $77,500 $127,500 $40,000 $245,000
60% 2nd month 204,000 222,000 186,000 306,000 714,000
15% 3rd month 51,000 55,500 46,500 153,000
Total cash collections $350,500 $369,000 $392,500 $1,112,000
b) Account Receivable balance
April 1, Beginning balance $51,000 from February
April 1, Beginning balance $277,500 from March
Total beginning balance $328,500
Total quarter sales $980,000
Total due from customers $1,308,500
Cash receipts for quarter $1,112,000
Balance on June 30th $196,500
c) The accounts receivable balance is the difference between the beginning balance of $328,500, the sales on account for the quarter of $1,308,500, and the cash receipts from customers for the quarter of $1,112,000. This gives a balance of $196,500, which represents 75% of June sales of $120,000 and 15% of May Sales of $76,500.
