Question

Finch Company began its operations on March 31 of the current year. Finch has the following projected costs:

	April	May	June
Manufacturing costs (1)	$155,500	$192,600	$216,100
Insurance expense (2)	860	860	860
Depreciation expense	2,170	2,170	2,170
Property tax expense (3) (1) Of the manufacturing costs, three-fourths are paid for in the month they are incurred; one-fourth is paid in the following month. (2) Insurance expense is $860 a month; however, the insurance is paid four times yearly in the first month of the quarter, (i.e., January, April, July, and October). (3) Property tax is paid once a year in November. The cash payments expected for Finch Company in the month of April are:	520	520	520

Answer 1

Cash Payments expected in the month of April are:
Manufacturing Cost               $116,625 (155,500*3/4)
Insurance Expense               $2,580     (860*3)
Property Tax Expense           $0           (to be paid in November)
Total Expected Payments     $119,205

(Note: Depreciation is not a cash expense.)