Question

The budget director for Yardley 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

a. Complete the schedule of cash payments for S&A expenses by filling in the missing amounts. b. Determine the amount of salaries payable the company will report on its pro forma balance sheet at the end of the fourth quarter. c. Determine the amount of prepaid insurance the company will report on its pro forma balance sheet at the end of the fourth quarter.

October November December Budgeted S&A Expenses Equipment lease expense Salary expense Cleaning supplies Insurance expense Depreciation on computer $ 5,400 6,200 2,830 1,800 1,900 2,000 700 $ 20,830 $ 5,400 6,700 2,750 1,800 1,900 2,000 700 $ 21,250 $ 5,400 7,100 3,040 1,800 1,900 2,000 700 $ 21,940 Rent Miscellaneous expenses Total operating expenses 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 $ 21,730 $ 17,050 $ 17,840 |

Answer 1

	October	November	December
Budgeted S&A Expenses
Equipment lease expense	5400	5400	5400
Salary expense	6200	6700	7100
Cleaning supplies	2830	2750	3040
Insurance expense	1800	1800	1800
Depreciation on computer	1900	1900	1900
Rent	2000	2000	2000
Miscellaneous expenses	700	700	700
Total operating expenses	20830	21250	21940
Schedule of Cash Payments for S&A Expenses
Equipment lease expense	5400	5400	5400
Prior month’s salary expense, 100%	0	6200	6700
Cleaning supplies	2830	2750	3040
Insurance premium	10800	0	0
Depreciation on computer	0	0	0
Rent	2000	2000	2000
Miscellaneous expenses	700	700	700
Total disbursements for operating expenses	21730	17050	17840
b. Salaries payable	7100
c. Prepaid insurance	5400	=1800*3