January February March
Salaries $56,900 $ 68,100 $ 72,200
Utilities 2,400 2,600 2,500
Other operating expenses 32,300 41,500 44,700
Total $91,600 $112,200 $119,400
Other operating expenses include $3,000 of monthly depreciation expense and $500 of monthly insurance expense that was prepaid for the year on May 1 of the previous year. Of the remaining expenses, 70% are paid in the month in which they are incurred, with the remainder paid in the following month. The Accrued Expenses Payable balance on January 1 relates to the expenses incurred in December.
Prepare a schedule of cash payments for operations for January, February, and March.
Answer:
EASTGATE PHYSICAL THERAPY INC.
Schedule of Cash Payments for Operations
For the Three Months Ending March 31, 2015
January February March
Payments of prior month’s expense1 $15,000 $ 26,430 $ 32,610
Payments of current month’s expense2 61,670 76,090 81,130
Total payment $76,670 $102,520 $113,740
1 $15,000, given as Accrued Expenses Payable, January 1
$26,430 = ($91,600 – $3,000 – $500) × 30%
$32,610 = ($112,200 – $3,000 – $500) × 30%
2 $61,670 = ($91,600 – $3,000 – $500) × 70%
$76,090 = ($112,200 – $3,000 – $500) × 70%
$81,130 = ($119,400 – $3,000 – $500) × 70%
Note: Insurance and depreciation are expenses that do not result in cash payments
in January, February, or March.