Home Exteriors Inc. is preparing its budget for the first quarter of 2012. 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 2011 and expected service revenues for 2012 are: November 2011, $90,000; December 2011, $80,000; January 2012, $100,000; February 2012, $120,000; March 2012, $130,000.
Purchases of landscaping supplies (direct materials) are paid 40% in the month of purchase and 60% the following month. Actual purchases for 2011 and expected purchases for 2012 are: December 2011, $14,000; January 2012, $12,000; February 2012, $15,000; March 2012, $18,000.
Instructions
(a) Prepare the following schedules for each month in the first quarter of 2012 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, 2012:
(1) Accounts receivable.
(2) Accounts payable.