Question

Horizon Financial Inc. was organized on February 28. Projected selling and administrative expenses for each of the first three months of operations are as follows: March $52,400 April 64,200 May 68,900 Depreciation, insurance, and property taxes represent $9,000 of the estimated monthly expenses. The annual insurance premium was paid on February 28, and property taxes for the year will be paid in June. Seventy percent of the remainder of the expenses are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month. Required:Prepare a schedule of cash payments for selling and administrative expenses for March, April, and May.

Answer 1

Answer:

Schedule for cash payments is prepared as follows

Explanation:

Expected selling and administrative Cash payment

                                                                              March    April       May

Expected expense                                             52,400   64,200  68,900          

Depreciation, insurance, and property tax    (9,000)    (9,000)  (9,000)

Total expected payment                                   43,400    55,200   59,900

As the 70% of expense are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month.

Schedule of cash payments for selling and administrative expenses for March, April, and May is prepared as follows

Schedule                                                        March       April       May

Total expected cash payment                    43,400    55,200    59,900

Cash payment in march (43,400x70%)      30,380    

Cash payment in march (43,400x30%)                      13,020

Cash payment in April (55,200x70%)                        38,640

Cash payment in april (55,200x30%)                                           16,560

Cash payment in may (59,900x70%)                                            41,930

Total cash payment                                    $30,380  $51,660   $58,490