Green Landscaping is preparing its budget for the first quarter of 2020. The next step in the
Question:
Green Landscaping 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, $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 fi rst quarter of 2020 and for the quarter in total:
1. Expected collections from clients.
2. Expected payments for landscaping supplies.
b. Determine the following budgeted balances at March 31, 2020:
1. Accounts receivable.
2. Accounts payable.
Step by Step Answer:
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt