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. Prepare schedules for cash receipts and cash payments, and determine ending balances for balance sheet. 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, $80,000; December 2019, $90,000; January 2020, $100,000; February 2020, $120,000; and March 2020, $140,000. 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, $14,000; January 2020, $12,000; February 2020, $15,000; and March 2020, $18,000.

Instructions 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.

b. Determine the following balances at March 31, 2020:

1. Accounts receivable.

2. Accounts payable.

Answer 1

EXPECTED CASH COLLECTIONS
			Jan	Feb	Mar	Quarter-1
Nov revenue collected	8,000			8000
Dec revenue collected	27,000	9000		36000
Jan revenue collected	60000	30000	10000	100000
Feb revenue collected		72,000	36,000	108000
Mar revenue collected			84000	84000
Total Cash Collections	95,000	1,11,000	1,30,000	336000
EXPECTED CASH PAYMENTS
			Jan	Feb	Mar	Quarter-1
Dec Purchases paid		5,600			5600
Jan Purchase paid		7200	4800		12000
Feb purchases paid			9,000	6,000	15000
March purchases paid			10800	10800
Total cash Payments		12,800	13,800	16,800	43400
Req b.
Balance of Accounts receivable as at Mar31:
Receivables of Feb revenue (120000*10%)		12000
Receivable of March revenue (140000*40%)	56000
Balance of Accounts receivable as at Mar31:	68000
Balance of Accounts payable as at Mar31:
Payable of March purchases (18000*40%)		7200
Balance of Accounts payable as at Mar31:		7200