Schedule of Expected Cash Collections
Silver Company sells a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year. These peak sales are shown in the company's sales budget for the second quarter given below (all sales are on account):
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April
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May
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June
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Total
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Butgeted sales
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$300,000
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$500,000
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$200,000
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$1,000,000
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From past experience, the company has learned that 20% of a month's sales are collected 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:
Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.
Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.