In: Accounting
Use the information below for Finch Company to answer the question that follow.
Finch Company began its operations on March 31 of the current year.
Finch has the following projected costs:
April | May | June | |
Manufacturing costs (1) | $157,800 | $192,400 | $205,800 |
Insurance expense (2) | 940 | 940 | 940 |
Depreciation expense | 2,050 | 2,050 | 2,050 |
Property tax expense (3) | 520 | 520 | 520 |
(1) Of the manufacturing costs, three-fourths are paid for in the
month they are incurred and one-fourth is paid for in the following
month.
(2) Insurance expense is $940 a month; however, the insurance is
paid four times yearly, in the first month of the quarter (i.e.,
January, April, July, and October).
(3) Property tax is paid once a year in November.
The cash payments expected for Finch Company in the month of April
are
a.$118,350
b.$139,485
c.$121,170
d.$157,800
>Correct Answer = Option 'c' $ 121,170
>working
Manufacturing cost paid in April | $118,350 | [$157800 x 3/4] |
Insurance expense paid in April | $2,820 | [$940 x 3 months] |
Derpeciation expense | $0 | [non cash item] |
Property Taxes | $0 | [paid in Nov] |
Total Cash payments in April | $121,170 | ANSWER |