Minor Landscaping Company is preparing its budget for the first quarter of 2017.
ID: 2531264 • Letter: M
Question
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.
(a1)
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(a2)
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
(ALL VALUES IN $)
MINOR LAUNCHING COMPANY
Schedule of Expected Collections From Clients
For the Quarter Ending March 31,2017
Months
Januray
Feburary
March
Quarter
November
12000
12000
(120000*10%)
December
33000
11000
44000
(110000*30%)
(110000*10%)
January
84000
42000
14000
140000
(140000*60%)
(140000*30%)
(140000*10%)
Feburary
96000
48000
144000
(160000*60%)
(160000*30%)
March
102000
102000
(170000*60%)
Total Collections
129000
149000
164000
442000
The company receives amount from clients of one month in three months. 60% in the same month, 30% in the month after, and 10% in the second month after the month of service.
MINOR LAUNCHING COMPANY
Schedule of Expected Payments to Supplier
For the Quarter Ending March 31,2017
Months
Januray
Feburary
March
Quarter
December
12600
12600
(21000*60%)
January
8000
12000
20000
(20000*40%)
(20000*60%)
Feburary
8800
13200
22000
(22000*40%)
(22000*60%)
March
10800
10800
(27000*40%)
Total Payments
20600
20800
24000
65400
The company paid amount to supplier of one month in two months. 40% in the same month and 60% in the next month.
(ALL VALUES IN $)
MINOR LAUNCHING COMPANY
Schedule of Expected Collections From Clients
For the Quarter Ending March 31,2017
Months
Januray
Feburary
March
Quarter
November
12000
12000
(120000*10%)
December
33000
11000
44000
(110000*30%)
(110000*10%)
January
84000
42000
14000
140000
(140000*60%)
(140000*30%)
(140000*10%)
Feburary
96000
48000
144000
(160000*60%)
(160000*30%)
March
102000
102000
(170000*60%)
Total Collections
129000
149000
164000
442000