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, $94,290; December 2016, $83,720; January 2017, $104,810; February 2017, $122,860; March 2017, $133,740.

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, $16,190; January 2017, $13,080; February 2017, $17,510; March 2017, $21,410.

(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 For the Quarter Ending March 31, 2017March 31, 2017For the Year Ending March 31, 2017
		January		February		March		Quarter
November		$		$		$		$
December
January
February
March
Total collections		$		$		$		$

(2) Expected payments for landscaping supplies.

GREEN LANDSCAPING INC. Schedule of Expected Payments for Landscaping Supplies For the Year Ending March 31, 2017For the Quarter Ending March 31, 2017March 31, 2017
		January		February		March		Quarter
December		$		$		$		$
January
February
March
Total payments		$		$		$		$

(b)

Determine the following balances at March 31, 2017:

(1)		Accounts receivable		$
(2)		Accounts payable		$

Answer 1

(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 For the Quarter Ending March 31, 2017
		January		February		March		Quarter
November		$9429		$		$		$9429
December		25116		8372				33488
January		62886		31443		10481		104810
February				73716		36858		110574
March						80244		80244
Total collections		$97431		$113531		$127583		$338545

(2) Expected payments for landscaping supplies.

GREEN LANDSCAPING INC. Schedule of Expected Payments for Landscaping Supplies For the Quarter Ending March 31, 2017
		January		February		March		Quarter
December		$6476		$		$		$6476
January		7848		5232				13080
February				10506		7004		17510
March						12846		12846
Total payments		$14324		$15738		$19850		$49912

(b)

Determine the following balances at March 31, 2017:

(1)		Accounts receivable		$65782
(2)		Accounts payable		$12846*4/6 = 8564