Question

Durango Co. pays 40% of its accounts payable in the month of purchase and 60% the following month. Durango Co. expects to purchase $40,000 of inventory on account in October and $100,000 on account in November. How much should Durango budget for cash disbursements for inventory for the month of November?

Answer 1

Answer:

The amount of $64,000 which is should be D (Durango) budget for cash disbursement for the inventory in the month of November

Explanation:

The amount which is should be D budget for cash disbursement for the inventory in the month of November is as:

Amount = 60% of purchase of October + 40% of purchases of November

where

60% of purchase of October = 60% × $40,000

= $24,000

60% of purchase of October = 40% × $100,000

= $40,000

So, putting the values above:

Amount = $24,000 + $40,000

Amount = $64,000