Question

The following budget information is available for Crescent Company for January Year 2: Sales $ 800,000 Cost of goods sold 540,000 Utilities expense 2,500 Administrative salaries 100,000 Sales commissions 5 % of Sales Advertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 Percentage of sales on credit 80 % All operating expenses are paid in cash in the month incurred. The amount of expected cash outflow for selling and administrative expenses would be: Multiple Choice $312,500. $262,500.

Answer 1

Answer:

$232,500

Explanation:

The computation of the amount of expected cash outflows for selling and admin expenses is shown below:

Utilities expense  $2,500

Administrative salaries $100,000

Sales commission ($800,000 ×  5%) $40,000

Advertising $20,000

Rent on administrative building $60,000

Miscellaneous administrative expenses $10,000

Total budgeted cash sales and administrative expenses $232,500

We added those expenses which affect the cash balance i.e decrease in cash balance so that the correct amount could arrive

All other items are not relevant. hence,ignored it