Green Landscaping Inc. is preparing its budget for the first quarter of 2017. Th

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.

Explanation / Answer

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

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