Question

Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: January February March Material purchases $ 13,180 $ 15,290 $ 12,110 Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $7,900. The expected January 31 Accounts Payable balance is:______________.

Answer 1

Answer:

The expected January 31 Accounts Payable balance is $6,590

Explanation:

The December Accounts Payable balance is $7,900 - this is the 50% purchase amount in December and will be paid in January.

In January, Fortune Company will pay 50% purchase amount in December and 50% purchase amount in January.

Expected payment = $7,900 + 50% x $13,180 = $14,490

At January 31, the expected Accounts Payable balance:

$13,180 x 50% = $6,590