Environmental Landscaping Inc. is preparing its budget for the first quarter of 2010.
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 provided, 30% the month after, and 10% the second month after receiving service.
Actual service revenue for 2009 and expected service revenues for 2010 are: November 2009, $90,000; December 2009, $80,000; January 2010, $100,000; February 2010, $120,000; March 2010, $130,000.
Purchases on landscaping supplies (direct materials) are paid 40% in the month of purchase and 60% the following month. Actual purchases for 2009 and expected purchases for 2010 are: December 2009, $14,000; January 2010, $12,000; February 2010, $15,000; March 2010, $18,000.
Instructions
(a) Prepare the following schedules for each month in the first quarter of 2010 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, 2010:
(1) Accounts receivable.
(2) Accounts payable.