Exercise 193 Minor Landscaping Company is preparing its budget for the first qua

Question

Exercise 193 Minor Landscaping Company is preparing its budget for the first quarter of 2017. 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 2016 and expected service revenues for 2017 are: November 2016, $120,000; December 2016, $110,000; January 2017, $140,000; February 2017, $160,000; March 2017, $170,000. Purchases on landscaping supplies (direct materials) are paid 40% in the month of purchase and 60% the following month. Actual purchases for 2016 and expected purchases for 2017 are: December 2016, $21,000; January 2017, $20,000; February 2017, $22,000; March 2017, $27,000.

Explanation / Answer

Schedule of expected cash payment :

Account payable on march 31,2017 = 27000*60% = 16200

January February March Quarter December 21000*60%=12600 12600 January 20000*40%=8000 20000*60%=12000 20000 February 22000*40%=8800 22000*60%=13200 22000 March 27000*40%=10800 10800 Total 20600 20800 24000 65400

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