Excel Learning Systems Inc. was organized on September 30, 2014. Projected selli

Question

Excel Learning Systems Inc. was organized on September 30, 2014. Projected selling and administrative expenses for each of the first three months of operations are as follows: Depreciation, insurance, and property taxes represent $38,000 of the estimated monthly expenses. The annual insurance premium was paid on September 30, and property taxes for the year will be paid in June. The company expects that 65% of the remainder of the expenses will be paid in the month in which they are incurred, with the balance to be paid in the following month. Prepare a schedule indicating cash payments for selling and administrative expenses for October, November, and December.

Explanation / Answer

Depreciation, insurance and property taxes are $38000 which are to be deducted in the calculation of Total expenses to be paid for each of the three months as Insurance has already been paid in September, Property tax would be paid in June and Depreciation is expensed anually.

So, none of them is required to be paid for now.

Months Projected selling and administrative expenses Depreciation, Insurance and property taxes Total Expenses Expenses to be paid in cash October $179900 $38000 $179900 - $38000= $141900 141900*65%=$92235 November $169100 $38000 $169100 -$38000= $131100 131100*65%= $85215 December $153900 $38000 $153900- $38000= $115900 115900*65%= $75335

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