Barnes Company expects to begin operating on January 1. The company's master budget contained the following operating expense budget: $\begin{array}{lrrr}
&\text { January}&\text { February}&\text { March }\
\text { Salary expenses } & \$ 40,000 & \$ 36,000 & \$ 36,000 \
\text { Sales commissions, } 5\% \text { of sales } & 30,000 & 32,000 & 24,000 \
\text { Utilities } & 2,800 & 2,800 & 2,800 \
\text { Depreciation on store equipment } &1,000 & 1,000 & 1,000\
\text { Rent } & 7,200& 7,200& 7,200 \
\text { Miscellaneous } & \underline{ 1,800}& \underline{1,800}& \underline{1,800 }\
\text { operating expenses } & \underline{ \$ 78,800}& \underline{\$80,800}& \underline{\$72,800}
\end{array}$
Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other expense items requiring cash payment are paid in the month in which they are recognized. The amount of accumulated depreciation appearing on the company's March 31 pro forma balance sheet is:

Question

Barnes Company expects to begin operating on January 1. The company's master budget contained the following operating expense budget: $\begin{array}{lrrr}
&\text { January}&\text { February}&\text { March }\
\text { Salary expenses } & \$ 40,000 & \$ 36,000 & \$ 36,000 \
\text { Sales commissions, } 5\% \text { of sales } & 30,000 & 32,000 & 24,000 \
\text { Utilities } & 2,800 & 2,800 & 2,800 \
\text { Depreciation on store equipment } &1,000 & 1,000 & 1,000\
\text { Rent } & 7,200& 7,200& 7,200 \
\text { Miscellaneous } & \underline{ 1,800}&  \underline{1,800}&  \underline{1,800 }\
\text { operating expenses } & \underline{ \$ 78,800}& \underline{\$80,800}& \underline{\$72,800}
\end{array}$
 Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other expense items requiring cash payment are paid in the month in which they are recognized. The amount of accumulated depreciation appearing on the company's March 31 pro forma balance sheet is:

Quizplus · Accepted Answer

The question is asking for the accumulated depreciation appearing on the company's March 31 pro forma balance sheet. Pro forma financial statements are projected financial statements based on assumptions and estimates. In this case, we can assume that three months have passed since the company began operating and we need to calculate the accumulated depreciation for that period.

From the operating expense budget, we can see that the depreciation expense is $1,000 per month. Therefore, the total depreciation expense for three months is $3,000. Accumulated depreciation is the total amount of depreciation expense that has been recorded on an asset over its useful life. Assuming that the company has acquired assets with a total cost of $12,000 (which is not given in the question), we can calculate the accumulated depreciation by multiplying the depreciation expense per month by the number of months that have passed:

Accumulated depreciation = Depreciation expense per month x Number of months
Accumulated depreciation = $1,000 x 3 = $3,000

Therefore, the answer is C, $3,000.

Barnes Company Expects to Begin Operating on January 1 Sales Commissions Are Paid in Cash in the Month Following