Green Landscaping Inc. is preparing its budget for the first quarter of 2017. Th

Question

Green Landscaping Inc. is preparing its budget for the first quarter of 2017. 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 2016 and expected service revenues for 2017 are November 2016, $92,810; December 2016, $82,610; January 2017, $102,240; February 2017, $121,770; March 2017, $134,990.

Purchases of landscaping supplies (direct materials) are paid 60% in the month of purchase and 40% the following month. Actual purchases for 2016 and expected purchases for 2017 are December 2016, $17,070; January 2017, $17,550; February 2017, $19,240; March 2017, $23,770.

(a)

Prepare the following schedules for each month in the first quarter of 2017 and for the quarter in total:

(1) Expected collections from clients.

GREEN LANDSCAPING INC. Schedule of Expected Collections From Clients Januar Februar March uarter November December anuary February March Total collections (2) Expected payments for landscaping supplies GREEN LANDSCAPING INC. Schedule of Expected Payments for Landscaping Supplies Januar Februar March uarter December anuary February March Total payments $ Determine the following balances at March 31, 2017: (1) Accounts receivable (2) Accounts payable

Explanation / Answer

SOLUTION

A1. Expected collections from clients.

A2.Expected payment-

B. Accounts receivable-

February= $121,770 * 10 % = $12,177

March = 134,990 *40% = $53,996

Total = $12,177 + $53,996 = $66,173

Accounts Payable-

March = $23,770 *40% = $9,508

January ($) February ($) March ($) Quarter ($) November ($92,810*10%) 9,281 9,281 December ($82,610 *30%), ($82,610 *10%) 24,783 8,261 33,044 January ($102,240 *60%), ($102,240 *30%), ($102,240 *10%) 61,344 30,672 10,224 102,240 February ($121,770 *60%), ($121,770 *30%) 73,062 36,531 109,593 March ($134,990 *60%) 80,994 80,994 Total collections 95,408 111,995 127,749 335,152

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