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.

Answer 1

a) Expected collections from clients

	January	February	March	Quarter
November	8000			8000
December	27000	9000		36000
January	60000	30000	10000	100000
February		72000	36000	108000
March			84000	84000
Total Cash collection	95000	111000	130000	336000

b) Expected payment for clients

	January	February	March	Quarter
December	5600			5600
January	7200	4800		12000
February		9000	6000	15000
March			10800	10800
Total Cash collection	12800	13800	16800	43400