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:
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April
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May
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June
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Total
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Budget sales (all on account)
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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 following sale. Bad debts are negligible and can be ignored. February sales totaled $230,000, and March sales totaled $260,000.
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.