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Schedule of cash payments for a service company EastGate Physical Therapy Inc. is planning its cash payments for operations for the first quarter (January-March), 2017. The Accrued Expenses Payable balance on January 1 is $15,000. The budgeted expenses for the next three months are as follows: Other operating expenses include $3,000 of monthly depreciation expense and $500 of monthly insurance expense that was prepaid for the year on May 1 of the previous year. Of the remaining expenses, 70% are paid in the month in which they are incurred, with the remainder paid in the following month. The Accrued Expenses Payable balance on January 1 relates to the expenses incurred in December. Prepare a schedule of cash payment s for operations for January, February, and March.

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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 21, Problem 21.21EX
Textbook Problem
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Schedule of cash payments for a service company

EastGate Physical Therapy Inc. is planning its cash payments for operations for the first quarter (January-March), 2017. The Accrued Expenses Payable balance on January 1 is $15,000. The budgeted expenses for the next three months are as follows:

Chapter 21, Problem 21.21EX, Schedule of cash payments for a service company EastGate Physical Therapy Inc. is planning its cash

Other operating expenses include $3,000 of monthly depreciation expense and $500 of monthly insurance expense that was prepaid for the year on May 1 of the previous year. Of the remaining expenses, 70% are paid in the month in which they are incurred, with the remainder paid in the following month. The Accrued Expenses Payable balance on January 1 relates to the expenses incurred in December.

Prepare a schedule of cash payment s for operations for January, February, and March.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

To Compute: The schedule of cash payments for operations.

Explanation of Solution

The following table shows the schedule of cash payments for operations.

Company E

Schedule of Cash Payments for operations

For the three months ending March 31, 2017

Details January ($) February ($) March ($)
Payments of prior month’s expense 15,000 26,430 (1) 32,610 (2)
Payments of current month’s expense 61,670 (3) 76,090 (4) 81,130 (5)
Total Payments 76,670 102,520 113,740

Table (1)

Working Notes:

Calculate the payments of prior month’s expense for February month.

Total expenses = $91,600

Depreciation expense = $3,000

Insurance expense = $500

Paid percentage = 30%

Payments of prior month's expense = ($91,600$3,000$500)×30%=$26,430 (1)

Calculate the payments of prior month’s expense for March month.

Total expenses = $112,200

Depreciation expense = $3,000

Insurance expense = $500

Paid percentage = 30%

Payments of prior month's expense = ($112,200$3,000$500)×30%=$32,610 (2)

Calculate the payments of current month’s expense for January month

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Chapter 21 Solutions

Financial & Managerial Accounting
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