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

question 85

Multiple Choice

Dobson Company expects to begin operating on January 1.The company's master budget contained the following operating expense budget: $$\begin{array} { | l | r | r | r | } \hline & { \text { January } } & \text { February } & { \text { March } } \\\hline \text { Salary expense } & \$ 40,000 & \$ 36,000 & \$ 36,000 \\\hline \text { Sales commissions, } 5 \% \text { of sales } & 24,000 & 30,000 & 28,000 \\\hline \text { Utilities } & 2,800 & 2,800 & 2,800 \\\hline \text { Depreciation on store equipment } & 1,800 & 1,800 & 1,800 \\\hline \text { Rent } & 7,200 & 7,200 & 7,200 \\\hline \text { Miscellane ous } & 1,800 & 1,800 & 1,800 \\\hline \text { Total operating expenses } & \$ 77,600 & \$ \quad 79,600 & \$ 77,600 \\\hline\end{array}$$ 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:

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Definitions:

Sole Proprietorship

A business structure where a single individual owns and operates the business, bearing sole responsibility for its debts and liabilities.

Capital

A financial resource that companies use for funding their operations, investing in their businesses, or acquiring assets.

General Partners

Individuals in a partnership who are fully involved in its operations and have unlimited liability for its debts and obligations.

Limited Partnership

A business structure where one or more general partners manage the business and are personally liable for business debts, while one or more limited partners contribute capital and have limited liabilities to the extent of their investment.