Question

January budgeted selling and administrative expenses for the retail shoe store that Craig Shea plans to open on January 1, 2018, are as follows: sales commissions, $27,000; rent, $12,500; utilities, $5,000; depreciation, $3,200; and miscellaneous, $2,800. Utilities are paid in the month after incurrence. Other expenses are expected to be paid in cash in the month in which they are incurred. Required a. Determine the amount of budgeted cash payments for January selling and administrative expenses. b. Determine the amount of utilities payable the store will report on the January 31 pro forma balance sheet. c. Determine the amount of depreciation expense the store will report on the income statement for the year 2018, assuming that monthly depreciation remains the same for the entire year. b. c. Budgeted cash payments Utilities payable Depreciation expense

Answer 1

a) Budgeted cash payments for the month of January selling and administrative expenses includes

1. Sales Commission $27,000

2. Rent $12,500

3. Miscellaneous $2,800

Total=27000+12500+2800= $42,300

Depreciation is a non-cash expense and utilities are payable in the month after the month in which they are incurred.

b) Utilities Payable the store reports amounts to $ 5,000

c) Depreciation reported by the store for the year in the income statement is 3200*12= $38,400