EastGate Physical Therapy Inc. is planning its cash payments for operations for the first quarter (January–March), 2015

EastGate Physical Therapy Inc. is planning its cash payments for operations for the first quarter (January–March), 2015. The Accrued Expenses Payable balance on January 1 is $15,000. The budgeted expenses for the next three months are as follows:








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.