Question

Finch Company began its operations on March 31 of the current year. Finch has the following projected costs:

April May June
Manufacturing costs* $157,400 $193,400 $200,500
Insurance expense** 1,180 1,180 1,180
Depreciation expense 2,140 2,140 2,140
Property tax expense*** 450 450 450
*Of the manufacturing costs, three-fourths are paid for in the month they are incurred; one-fourth is paid in the following month.
**Insurance expense is $1,180 a month; however, the insurance is paid four times yearly in the first month of the quarter, (i.e., January, April, July, and October).
***Property tax is paid once a year in November.

The cash payments expected for Finch Company in the month of May are

a.$223,750

b.$184,400

c.$145,050

d.$39,350

Answer 1

b.$184,400

Step-by-step explanation:

Finch Company

April May June

Manufacturing costs* $157,400 $193,400 $200,500

Payment of April 1/4 $ 39350

Payment of May 3/4 $145050

Insurance expense,Depreciation expense , Property tax expense,None of these will be paid in the month of May .

The insurance is paid four times yearly in the first month of the quarter, (i.e., January, April, July, and October).

Depreciation is not paid . It is deducted from the value of the asset.

Property tax is paid once a year in November.

Total Payments in May are $ 39350 +$145050= $184,400

Choice B is the correct answer.