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
lotal
Budgeted sales (all on account)
$420,000
$620,000
$240,000
$1,280,000
ها
From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 65% 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 $350,000, and March sales totaled $380,000.

To calculate the cash collections for Silver Company during the second quarter (April, May, and June), we'll use the percentages provided for the collection pattern (20% collected in the month of sale, 65% collected the following month, and 15% collected two months later).

### Step-by-step breakdown:

#### 1. **Collections in April**  
- **From February sales ($350,000):**  
  15% of February's sales will be collected in April:  
  \[ 350,000 \times 0.15 = 52,500 \]

- **From March sales ($380,000):**  
  65% of March's sales will be collected in April:  
  \[ 380,000 \times 0.65 = 247,000 \]

- **From April sales ($420,000):**  
  20% of April's sales will be collected in April:  
  \[ 420,000 \times 0.20 = 84,000 \]

So, the total collections in April:  
\[
52,500 + 247,000 + 84,000 = 383,500
\]

#### 2. **Collections in May**  
- **From March sales ($380,000):**  
  15% of March's sales will be collected in May:  
  \[ 380,000 \times 0.15 = 57,000 \]

- **From April sales ($420,000):**  
  65% of April's sales will be collected in May:  
  \[ 420,000 \times 0.65 = 273,000 \]

- **From May sales ($620,000):**  
  20% of May's sales will be collected in May:  
  \[ 620,000 \times 0.20 = 124,000 \]

So, the total collections in May:  
\[
57,000 + 273,000 + 124,000 = 454,000
\]

#### 3. **Collections in June**  
- **From April sales ($420,000):**  
  15% of April's sales will be collected in June:  
  \[ 420,000 \times 0.15 = 63,000 \]

- **From May sales ($620,000):**  
  65% of May's sales will be collected in June:  
  \[ 620,000 \times 0.65 = 403,000 \]

- **From June sales ($240,000):**  
  20% of June's sales will be collected in June:  
  \[ 240,000 \times 0.20 = 48,000 \]

So, the total collections in June:  
\[
63,000 + 403,000 + 48,000 = 514,000
\]

### Summary of Cash Collections:
- **April:** $383,500
- **May:** $454,000
- **June:** $514,000

### Total collections for the second quarter:  
\[
383,500 + 454,000 + 514,000 = 1,351,500
\]

---

Would you like further clarification on this calculation, or do you have any additional questions?

Here are some related questions you could explore:
1. How would the collections change if the collection percentages were different?
2. How does the timing of sales affect the company's cash flow?
3. What are the implications of this collection pattern for planning operational expenses?
4. How could bad debt affect these calculations if it were non-negligible?
5. What are other strategies a company could use to improve cash collections?

**Tip:** Monitoring cash flow is essential in businesses with seasonal peaks to ensure sufficient liquidity to cover expenses during slower months.

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 - $420,000
May - $620,000
June - $240,000
Total - $1,280,000
From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 65% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. February sales totaled $350,000, and March sales totaled $380,000.

Learn how to calculate cash collections for Silver Company, a business with peak sales in May, based on its sales budget and collection pattern. This detailed guide walks through percentage-based cash collection calculations for each month in the second quarter, using sales data for February through June. Suitable for high school students studying business math or accounting.

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