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 April MayExpenses $125,800 $117,000 $106,500Depreciation, insurance, and property taxes represent $27,000 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, 65% 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.Prepare a schedule of cash payments for selling and administrative expenses for March, April, and May.

Answer 1

Answer:

Depreciation, insurance, and property taxes represent $27,000 of the estimated monthly expenses so will have to be removed to find out how much is due in the month.

                                                                          March           April           May

March Expenses :  

Paid in March                                                   $73,112

Paid in April                                                                          $25,688

April Expenses :  

Paid in April                                                                     $66, 600

Paid in May                                                                                            $23,400

May Expenses :  

Paid in May                                                                                            $‭58,830‬

Total Cash Payment                                        $73,112      $92,288   $82,230

Working

March Expenses

Paid in March ((125,800 - 27,000)* 74%) = $73,112

Paid in April ((125,800 - 27,000)*26%) = $25,688.

April Expenses

Paid in April ((117,000 - 27,000)*74%) =  $66, 600

Paid in May ((117,000 - 27,000)*26%) = $23,400

May Expenses

Paid in May ((106,500 - 27,000)*74%) = $‭58,830‬