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

question 141

Multiple Choice

Dobson 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 } & 24,000 & 30,000 & 28,000 \\\text { Utilities } & 2,800 & 2,800 & 2,800 \\\text { Depreciation on store equipment } &1,800 & 1,800 & 1,800\\\text { Rent } & 7,200& 7,200& 7,200 \\\text { Miscellaneous } & \underline{ 1,800}& \underline{1,800}& \underline{1,800 }\\\text { operating expenses } & \underline{ \$ 77,600}& \underline{\$79,600}& \underline{\$77,600}\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 cash to be paid for operating expenses during the month of January is:

• A) $53,600.
• B) $51,800.
• C) $77,600.
• D) None of the answers are correct.

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