Question

The budget director for Vernon Cleaning Services prepared the following list of expected selling and administrative...

The budget director for Vernon Cleaning Services prepared the following list of expected selling and administrative expenses. All expenses requiring cash payments are paid for in the month incurred except salary expense and insurance. Salary is paid in the month following the month in which it is incurred. The insurance premium for six months is paid on October 1. October is the first month of operations; accordingly, there are no beginning account balances.

Required

  1. Complete the schedule of cash payments for S&A expenses by filling in the missing amounts.

  2. Determine the amount of salaries payable the company will report on its pro forma balance sheet at the end of the fourth quarter.

  3. Determine the amount of prepaid insurance the company will report on its pro forma balance sheet at the end of the fourth quarter.

Complete the schedule of cash payments for S&A expenses by filling in the missing amounts.

October November December
Budgeted S&A Expenses
Equipment lease expense $6,800 $6,800 $6,800
Salary expense 5,900 6,400 6,800
Cleaning supplies 2,870 2,800 3,050
Insurance expense 1,800 1,800 1,800
Depreciation on computer 2,200 2,200 2,200
Rent 2,400 2,400 2,400
Miscellaneous expenses 750 750 750
Total operating expenses $22,720 $23,150 $23,800
Schedule of Cash Payments for S&A Expenses
Equipment lease expense
Prior month’s salary expense, 100%
Cleaning supplies
Insurance premium
Depreciation on computer
Rent
Miscellaneous expenses
Total disbursements for operating expenses $23,620 $18,650 $19,400

Homework Answers

Answer #1
October November December
Budgeted S&A Expenses
Equipment lease expense 6800 6800 6800
Salary expense 5900 6400 6800
Cleaning supplies 2870 2800 3050
Insurance expense 1800 1800 1800
Depreciation on computer 2200 2200 2200
Rent 2400 2400 2400
Miscellaneous expenses 750 750 750
Total operating expenses 22720 23150 23800
Schedule of Cash Payments for S&A Expenses
Equipment lease expense 6800 6800 6800
Prior month’s salary expense, 100% 0 5900 6400
Cleaning supplies 2870 2800 3050
Insurance premium 10800 0 0
Depreciation on computer 0 0 0
Rent 2400 2400 2400
Miscellaneous expenses 750 750 750
Total disbursements for operating expenses 23620 18650 19400
b. Salaries payable 6800
c. Prepaid insurance 5400 =1800*3
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