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) $300,000 $500,000 $200,000 $1,000,000
From past experience, the company has learned that 20% of a month's sales are collected in the month of the sale, another 70% are collected in the month following the sale, and the remaining 10% are collected in the second month following the sale. Bad debts are negligible and can be ignored. February sales totaled $230,000, and March sales totaled $260,000.
Required: YOU MUST SHOW YOUR WORK
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.