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 schedule of cash collections and a schedule of cash payments. The following information has been collected: All sales are on account and 60% is collected in the month of sale, 30% 1 month after the sale, and 10% two months after the sale. Actual sales revenues for November 2016 were $80,000 and December 2016 $90,000. Projected sales revenue for January 2017 $100,000, February 2017 $120,000, and March 2017 $140,000. Purchases of direct materials are made on account and 60% is paid in the month of purchase and 40% in the month following the purchase. Actual purchases of direct materials for December 2016 are $14,000. Projected purchases of direct materials for January 2017 $12,000, February 2017 $15,000, and March 2017 $18,000.

Instructions:
(a) Prepare a schedule of cash collections from sales by month for January, February, and March 2017.
(b) Determine the accounts receivable balance as of March 31, 2017.
(c) Prepare a schedule of cash payments for direct materials by month for January, February, and March 2017.
(d) Determine the accounts payable balance as of March 31, 2017.

Answer 1

a	GREEN LANDSCAPING INC.
	Schedule of Expected Collections From Clients
	For the Quarter Ending March 31, 2017
		January	February	March	Quarter
	November ($80,000)	$        8,000			$        8,000
	December ($90,000)	27,000	$        9,000		36,000
	January ($100,000)	60,000	30,000	$        10,000	100,000
	February ($120,000)		72,000	36,000	108,000
	March ($140,000)			84,000	84,000
	Total collections	$     95,000	$   111,000	$     130,000	$   336,000
b	Accounts receivable at March 31, 2017: ($120,000 X 10%) + ($140,000 X 40%) = $68,000
c	GREEN LANDSCAPING INC.
	Schedule of Expected Payments for Landscaping Supplies
	For the Quarter Ending March 31, 2017
		January	February	March	Quarter
	December ($14,000)	$        5,600			$        5,600
	January ($12,000)	7,200	$        4,800		12,000
	February ($15,000)		9,000	$          6,000	15,000
	March ($18,000)			10,800	10,800
	Total payments	$     12,800	$     13,800	$        16,800	$     43,400
d	Accounts payable at March 31, 2017: ($18,000 X 40%) = $7,200