Question

Cat Co. forecasts merchandise purchases of $11,600 in January, $11,800 in February, and $15,400 in March; 40% of purchases are paid in the month of purchase and 60% are paid in the following month. At December 31 of the prior year, the balance of Accounts Payable (for December purchases) is $8,000. What is the cash disbursements for merchandise for the month of February

Answer 1

Answer:

The cash disbursements for merchandise in February is $11680

Explanation:

The cash disbursements for merchandise in February will include the payment for 60% of merchandise purchases for January and 40% of merchandise purchases for February.

The amount of January purchases to be paid in February = 0.6 * 11600 = 6960

The amount of February purchases to be paid in February = 0.4 * 11800 = 4720

The total amount of cash disbursements in February fro merchandise is,

6960 + 4720  =  $11680