Yard Work Company is preparing its budget for the first quarter of 2013. The nex
ID: 2455168 • Letter: Y
Question
Yard Work Company is preparing its budget for the first quarter of 2013. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected.
Clients usually pay 60% of their fee in the month that service is performed, 30% the month after, and 10% the second month after receiving service.
Actual service revenue for 2012 and expected service revenues for 2013 are November 2012, $80,000; December 2012, $90,000; January 2013, $100,000; February 2013, $120,000; March 2013, $140,000.
Purchases of landscaping supplies (direct materials) are paid 60% in the month of purchase and 40% the following month. Actual purchases for 2012 and expected purchases for 2013 are December 2012, $14,000; January 2013, $12,000; February 2013, $15,000; March 2013, $18,000.
(a)
Prepare the following schedules for each month in the first quarter of 2013 and for the quarter in total:
(1) Expected collections from clients.
January
February
March
Quarter
(2) Expected payments for landscaping supplies.
January
February
March
Quarter
(b)
Determine the following balances at March 31, 2013:
Yard Work Company Schedule of Expected Collections From Clients
For the Year Ending March 31, 2013For the Quarter Ending March 31, 2013March 31, 2013
January
February
March
Quarter
November$
$
$
$
December January February March Total collections$
$
$
$
Explanation / Answer
(1) Expected collections from clients.
(2) Expected payments for landscaping supplies.
(b)
Accounts receivable = 10% of February sale + 40% of March sale = 120000 * 10% + 140000*40% = $68000
Accounts Payable = 40% of March purchase = 18000 * 40% = $7200
Yard Work Company Schedule of Expected Collections From Clients For the Quarter Ending March 31, 2013 ($) Total sales January February March Quarter November 80000 8000 8000 December 90000 27000 9000 36000 January 100000 60000 30000 10000 100000 February 120000 72000 36000 108000 March 140000 84000 84000 Total collections 95000 111000 130000 336000Related Questions
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