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

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

	April	May	June
Manufacturing costs*	$155,900	$198,700	$206,800
Insurance expense**	990	990	990
Depreciation expense	2,110	2,110	2,110
Property tax expense***	600	600	600

*Of the manufacturing costs, three-fourths are paid for in the month they are incurred; one-fourth is paid in the following month.
**Insurance expense is $990 a month; however, the insurance is paid four times yearly in the first month of the quarter, (i.e., January, April, July, and October).
***Property tax is paid once a year in November.

The cash payments expected for Finch Company in the month of May are

a.$149,025

b.$38,975

c.$226,975

d.$188,000

I dont get it

Solutions

Expert Solution

Ans:D.$188,000 is Correct Answer

cash payments expected for the month of May = D.$188,000

Working notes for the above answer:

The cash payments for the month of May

1/4 manufacturing exp of April paid in May
=155900/4

38975

3/4 manufacturing exp of May paid in May
=198,700*3/4

149025

Cash payments for the may

38975+143175=182150

188,000

Note:

Depreciation is non cash exp is not considered

Insurance expense is $1,060 a month; however, the insurance is paid four times yearly in the month of January, April, July, and October so in the may month it will not be considered

Property tax is paid once a year in November so it will appear in the November month cash payment

ekkarill92 answered 2 years ago

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