Question

Garnett Co. expects to purchase $90,000 of materials in July and $105,000 of materialsin August. Three-quarters of all purchases are paid for in the month of purchase, and theother one-fourth are paid for in the month following the month of purchase. How muchwill August's cash disbursements for materials purchases be?

Answer 1

Answer: $101,250

Explanation:

Given that,

Expects to purchase material in July = $90,000

Expects to purchase material in August = $105,000

August's cash disbursements for materials purchases:

= 75% of August purchases + 1/4 of July purchases

= 0.75 × $105,000 + 0.25 × $90,000

= $78,750 + $22,500

= $101,250