Question

Kohlman Company began its operations on March 31 of the current year. Projected purchases for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Admin expenses represent $28,800 of the estimated monthly payments. Seventy-five percent (75%) of the purchases are expected to be paid in the month in which they are purchased. Twenty percent (20%) will be paid in the following month. Five percent (5%) is expected to be uncollectable. The cash payments for the month of April and May are:
a. $185,600 and 224,000
b. $117,600 and 146,600
c. $146,400 and 206,560.
d. $156,800 and 195,000

Answer 1

Answer:

c. $146,400 and 206,560.

Explanation:

Monthly Purchases are as follows;

April =$156,800

May= $195,200

June= $217,600

Since Admin expenses are paid every month,

April =$28,800

May = $28,800

June =$28,800

75% of April purchases will be paid in April . Use these to calculate the payments;

Pmts

April = 75%* $156,800 = $117,600

add Admin expenses to find total cash payments;

APRIL = $117,600+ $28,800 = $146,400

In May,20% of April purchases will be paid ,  75% of  May purchases will also be paid plus admin expenses. Use these to calculate the payments;

May= (20%* $156,800) + (75% * $195,200) + $28,800

MAY = 31360 +146400 +28800 = $206,560