Finch Company began its operations on March 31 of the current year. Finch Co. ha
ID: 2621801 • Letter: F
Question
Finch Company began its operations on March 31 of the current year. Finch Co. has the following projected costs:April May June Manufacturing costs(1) $156,800 $195,200 $217,600 Insurance expense (2) $1,000 $1,000 $1,000 Depreciation expense $2,000 $2,000 $2,000 Property Tax expense(3) $500 $500 $500 (1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is paid in the following month.
(2) Insurance expense is $1,000 a month however the insurance is paid four times year 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 for Finch Company in the month of May are: a. $185,600 b. $189,100 c. $149,900 d. $187,600 Finch Company began its operations on March 31 of the current year. Finch Co. has the following projected costs:
April May June Manufacturing costs(1) $156,800 $195,200 $217,600 Insurance expense (2) $1,000 $1,000 $1,000 Depreciation expense $2,000 $2,000 $2,000 Property Tax expense(3) $500 $500 $500 (1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is paid in the following month.
(2) Insurance expense is $1,000 a month however the insurance is paid four times year 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 for Finch Company in the month of May are: $185,600 $189,100 $149,900 $187,600 April May June Manufacturing costs(1) $156,800 $195,200 $217,600 Insurance expense (2) $1,000 $1,000 $1,000 Depreciation expense $2,000 $2,000 $2,000 Property Tax expense(3) $500 $500 $500
Explanation / Answer
Hi,
Please find the detailed answer as follows:
Cash Payments = 3/4*195200 (May's Manufacturing Cost) + 156800*1/4 (April's Manufacturing Cost Received in May) = 185600
Option A (185600) is the correct answer.
Notes:
a) Insurance expense is paid in April for the quarter. So, there will be no cash disbursement in the Month of May.
b) Depreciation expense is a non-cash expense.
c) Property taxes are paid in November for the entire Year. So, no cash disbursement will take place in May.
Thanks.