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

question 93

Multiple Choice

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

• A) $53,600.
• B) $51,800.
• C) $77,600.
• D) None of these.

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Definitions:

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