Question

Schedule of Cash Payments for a Service Company

SafeMark 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	$122,700
April	112,900
May	102,700

Depreciation, insurance, and property taxes represent $26,000 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. 67% 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 indicating cash payments for selling and administrative expenses for March, April, and May.

SafeMark Financial Inc.
Schedule of Cash Payments for Selling and Administrative Expenses
For the Three Months Ending May 31
	March	April	May
March expenses:
Paid in March	$
Paid in April		$
April expenses:
Paid in April
Paid in May			$
May expenses:
Paid in May
Total cash payments	$	$	$

Answer 1

• All working forms part of the answer
• Workings

	Total	Depreciation, Insurance & property Taxes	Actual to be paid in Cash	67% of total	33% of total
March	$        122,700.00	$          26,000.00	$        96,700.00	$        64,789.00	$         31,911.00
April	$        112,900.00	$          26,000.00	$        86,900.00	$        58,223.00	$        28,677.00
May	$        102,700.00	$          26,000.00	$        76,700.00	$        51,389.00	$         25,311.00

• Depreciation is not included because it’s a NON Cash item and does not involve actual cash outflows.
• Insurance expenses were already paid in February.
• Property Taxes will be paid in June.
• Hence, all of the above are deducted
• Answer

SafeMark Financial Inc.
Schedule of Cash Payments for Selling and Administrative Expenses
For the Three Months Ending May 31
	March	April	May
March expenses:
Paid in March	$       64,789.00
Paid in April		$       31,911.00
April expenses:
Paid in April		$       58,223.00
Paid in May			$      28,677.00
May expenses:
Paid in May			$      51,389.00
Total cash payments	$       64,789.00	$       90,134.00	$      80,066.00