Question

Venus Company has the following information: Month Budgeted Sales January $90,000 February 85,000 March 92,000 April 79,000 Budgeted Operating Expenses Per Month Wages $15,000 Advertising 12,000 Depreciation 3,000 Sales Commission 4% of sales All cash expenses are paid as incurred. What are the total cash disbursements budgeted for operating expenses for the month of January

Answer 1

$20,600

Step-by-step explanation:

Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of the asset.

Depreciation is a non-cash item in the income statement as the actual cash spent for the purchase of the asset would have been capitalized in the balance sheet.

Hence the total cash disbursements budgeted for operating expenses for the month of January would not include depreciation.

Total cash disbursements budgeted for operating expenses for the month of January

= $15,000 + $12,000 + (4% × $90,000)

= $15,000 + $12,000 + $3,600

= $20,600