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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). The Accrued Expenses Payable balance on January 1 is $15,000. The budgeted expenses for the next three months are as follows: January February March Salaries $56.900 $ 68.100 $ 72,200 Utilities 2,400 2,600 2,500 Other operating expenses 32.,00 41,500 44,700 Total $91,600 $112,200 $119,400 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 payments for operations for January, February, and March.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 22, Problem 22.21EX
Textbook Problem

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). The Accrued Expenses Payable balance on January 1 is $15,000. The budgeted expenses for the next three months are as follows:

  January February March
Salaries $56.900 $ 68.100 $ 72,200
Utilities 2,400 2,600 2,500
Other operating expenses 32.,00 41,500 44,700
Total $91,600 $112,200 $119,400

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 payments for operations for January, February, and March.

Expert Solution
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

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 22 Solutions

Accounting
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