Question

A company budgets the following merchandising purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase, 50% in the month after the purchase, and the remaining balance in the second month after the purchase. Cash disbursements for June for merchandise is

Answer 1

Answer:

$77,500

Explanation:

The computation of the cash disbursement for June month is shown below:

= June purchase × month percentage given + May purchase × following month percentage + April purchase × second following month percentage

= $60,000 × 25% +$ 90,000 × 50% + $70,000 × 25%

= $15,000 + $45,000 + $17,500

= $77,500

The remaining percentage would be

= 100% - 25% - 50%

= 25%