91Ó°ÊÓ

Preparing a financial budget—schedule of cash payments

Marcel Company has the following projected costs for manufacturing and selling and administrative expenses:

January February March Direct materials purchases \( 3,100 \) 3,500 $ 4,800 Direct labor costs 3,300 3,500 3,600 Depreciation on plant 550 550 550 Utilities for plant 650 650 650 Property taxes on plant 200 200 200 Depreciation on office 550 550 550 Utilities for office 250 250 250 Property taxes on office 170 170 170 Office salaries 3,500 3,500 3,500

All costs are paid in month incurred except: direct materials, which are paid in the month following the purchase; utilities, which are paid in the month after incurred; and property taxes, which are prepaid for the year on January 2. The Accounts Payable and Utilities Payable accounts have a zero balance on January 1. Prepare a schedule of cash payments for Marcel for January, February, and March. Determine the balances in Prepaid Property Taxes, Accounts Payable, and Utilities Payable as of March 31.

Step by step solution

01

Preparation of schedule of cash receipts

Particulars	January	February	March
Total budgeted merchandise inventory	$3,100	$3,500	$4,800
Cash payments:
Direct materials	$0	$3,100	$3,500
Direct labor cost	$3,300	$3,500	$3,600
Utilities for plant	$0	$650	$650
Property taxes on plant	$200*12 =$2,400	-	-
Utilities for office	$0	$250	$250
Property taxes on office	$170*12 =$2,040	-	-
Office salaries	$3,500	$3,500	$3,500
Total cash payments	$14,340	$14,500	$16,300

02

Calculation of balances in prepaid property taxes, accounts payable, and utilities payable

Prepaid property taxes = (tax on office+ tax on plant)*9

= ($200+$170)*9

= $3,330

Accounts payable =4,800

Utilities payable = Utilities on office+ utilities on plant

= $650 + $250

= $900

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91Ó°ÊÓ!