Exercise 7-1 Schedule of Expected Cash Collections [LO7-2]

Silver Company makes a product that is very popular as a Mothers Day gift. Thus, peak sales occur in May of each year, as shown in the companys sales budget for the second quarter given below:

	April	May	June	Total
Budgeted sales (all on account)	$410,000	$610,000	$210,000	$1,230,000

From past experience, the company has learned that 25% of a months 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 $340,000, and March sales totaled $370,000.

Required:

1.

Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

Silver Company
Schedule of Expected Cash Collections
	April	May	June	Total
February sales
March sales
April sales
May sales
June sales
Total cash collections

2.	Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.

Silver Company
Accounts receivable at June 30
May sales
June sales
Total accounts receivable at June 30