Question

Exercise 14-11 Preparing a schedule of cash payments for selling and administrative expenses LO 14-4

The budget director for Munoz 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.

Req A

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	$6,200	$6,200	$6,200
Salary expense	6,300	6,800	7,200
Cleaning supplies	2,840	2,750	3,000
Insurance expense	1,900	1,900	1,900
Depreciation on computer	2,500	2,500	2,500
Rent	2,200	2,200	2,200
Miscellaneous expenses	660	660	660
Total operating expenses	$22,600	$23,010	$23,660
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	$23,300	$18,110	$18,860

• Req B and C

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

b.	Salaries payable
c.	Prepaid insurance

Answer 1

	October	November	December
Budgeted S&A Expenses
Equipment lease expense	6200	6200	6200
Salary expense	6300	6800	7200
Cleaning supplies	2840	2750	3000
Insurance expense	1900	1900	1900
Depreciation on computer	2500	2500	2500
Rent	2200	2200	2200
Miscellaneous expenses	660	660	660
Total operating expenses	22600	23010	23660
Schedule of Cash Payments for S&A Expenses
Equipment lease expense	6200	6200	6200
Prior month’s salary expense, 100%	0	6300	6800
Cleaning supplies	2840	2750	3000
Insurance premium	11400	0	0
Depreciation on computer	0	0	0
Rent	2200	2200	2200
Miscellaneous expenses	660	660	660
Total disbursements for operating expenses	23300	18110	18860
b. Salaries payable	7200
c. Prepaid insurance	5700	=1900*3