Question

Green Landscaping Inc. is preparing its budget for the first quarter of 2020. 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 2019 and expected service revenues for 2020 are November 2019, $94,110; December 2019, $84,830; January 2020, $102,390; February 2020, $123,530; and March 2020, $131,560. Purchases of landscaping supplies (direct materials) are paid 60% in the month of purchase and 40% the following month. Actual purchases for 2019 and expected purchases for 2020 are December 2019, $17,540; January 2020, $16,370; February 2020, $18,950; and March 2020, $19,050.

(a) Prepare the following schedules for each month in the first quarter of 2020 and for the quarter in total: (1) Expected collections from clients. (2) Expected payments for landscaping supplies. Determine the following balances at March 31, 2020: (1) Accounts receivable $ (2) Accounts payable $

Answer 1

1

Particulars	Jan	Feb	Mar	Total
Nov 2019 sales collections	$      9,411			$     9,411
Dec 2019 sales collections	$    25,449	$    8,483		$   33,932
Jan sales collections	$    61,434	$ 30,717	$   10,239	$ 102,390
Feb sales collections		$ 37,059	$   12,353	$   49,412
Mar sales collections			$   78,936	$   78,936
Total	$    96,294	$ 76,259	$ 101,528	$ 274,081

Total cash collections 274,081

2

Particulars	Jan	Feb	Mar	Total
Dec 2019 purchases payments	$      7,016	$          -		$     7,016
Jan purchases payments	$      9,822	$    6,548		$   16,370
Feb purchases payments		$ 11,370	$     7,580	$   18,950
Mar purchases payments			$   11,430	$   11,430
Total	$    16,838	$ 17,918	$   19,010	$   53,766

Total payments 53,766

3

Accounts receivable	Jan	Feb	Mar	Total
Sales	$      102,390	$      123,530	$      131,560	$ 357,480
Less: collections	$     (102,390)	$       (49,412)	$       (78,936)	$(230,738)
Accounts receivable	$                 -	$         74,118	$         52,624	$ 126,742

Accounts receivable balance 126,742

4

Accounts payable balance consist of March purchases related payment to be made in April = $19,050*0.4 = $7,620

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