Frontenac Landscaping Inc

Frontenac 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, $120,000; December 2009, $110,000; January 2010, $130,000; February 2010, $160,000; March 2010, $170,000.
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, $21,000; January 2010, $18,000; February 2010, $22,000; March 2010, $27,000.
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.

Correct Answer:

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