Question

Swifty Corporation expects to purchase $90000 of materials in July and $110000 of materials in August. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. How much will August's cash disbursements for materials purchases be?
A. $105000
B. $110000
C. $67500
D. $82500

Answer 1

Answer:

option (A) $105,000

Explanation:

Data provided in the question:

Expected purchase of material in July = $90,000

Expected purchase of material in August = $110,000

Amount paid in the month of purchase = $\frac{3}{4}$

Amount paid in the following month = $\frac{1}{4}$

Now,

August's cash disbursements for materials purchases will be

= Three fourth of the amount of material purchased in August and one fourth of the amount of material purchased in July

[as August is the following month for July]

= $\frac{3}{4}$ × $110,000 +  $\frac{1}{4}$ × $90,000

= 82,500 + 22,500

= $105,000

Hence,

the answer is option (A) $105,000