Question

Finch Company began its operations on March 31 of the current year. Finch has the following projected costs April May $156 800 Manufacturing costs (1) Insurance expense (2) Depreciation expense Property tax expense (3) 1,000 2,000 $195,200 1,000 2,000 Soo $217,600 1.000 2.000 500 500 (1) of the manufacturing costs, three-fourths are paid for in the month they are incurred; one-fourth is paid in the following month. (2) Insurance expense is $1,000 a month; however, the insurance is paid four times yearly in the first month of the quarter, (.e., January April, July, and October). (3) Property tax s paid once a year in November The cash payments expected for Finch Company in the month of May are a $149.900 b. 5189,100 c. $185.600 d. 5187,600

Answer 1

Answer-Cash Payment= 3/4 *$195,200 (May's manufacturing cost)+1/4 *$156,800 (April's manufacturing cost received in May)

=$146,400+$39,200

=$185,600

Hence, Option c. is correct $185,600

Notes:-

1-Insurance expense is paid in April for the quarter. So, there will be no cash disbursement in the Month of May.

2-Depreciation expense is a non-cash expense. so it will not taken into consideration.

3-Property taxes are paid in November for the entire Year. So, no cash disbursement will take place in May.

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