Administrative expenses are expected to be $15,000 for each of the months of January, February and March 2015 and to increase by 10% in each of the next three months of the year. Administrative expenses are paid one month after they are incurred, and include a depreciation charge of $3,000 per month that is not expected to change over the 6 months. The figure for administrative expenses that will appear in the April cash budget is:
A) $15,000
B) $12,000
C) $13,200
D) $16,500

Question

Quizplus · Accepted Answer

The administrative expenses for March are $15,000, and since they are paid one month after they are incurred, the cash budget for April will reflect March's expenses minus the non-cash depreciation charge of $3,000, resulting in $12,000.

Administrative Expenses Are Expected to Be $15,000 for Each of the Months