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)	$390,000	$590,000	$230,000	$1,210,000

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 $320,000, and March sales totaled $350,000.

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.

Question #2

Exercise 7-2 Production Budget [LO7-3]

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:

	Sales in Units
April		70,000
May		85,000
June		110,000
July		90,000

The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 15% of the following months sales. The inventory at the end of March was 10,500 units.

Required:

Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.