Question

1. Schedule of cash payments for a service company

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	$172,200
April	158,400
May	144,100

Depreciation, insurance, and property taxes represent $36,000 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. 74% 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

Horizon Financial Inc.
Schedule of Cash Payments for Selling and Administrative Expenses
For the Three Months Ending May 31, 2016
	March	April	May
March expenses:
Paid in March	100788
Paid in April		35412
April expenses:
Paid in April		90576
Paid in May			31824
May expenses:
Paid in May			79994
Total cash payments	100788	125988	111818
Workings:
	March	April	May
March expenses:
Paid in March	=(172200-36000)*74%
Paid in April		=(172200-36000)*26%
April expenses:
Paid in April		=(158400-36000)*74%
Paid in May			=(158400-36000)*26%
May expenses:
Paid in May			=(144100-36000)*74%