Final answer:
The budgeted cash payments for materials in January for Fortune Company are calculated by adding half of January's material purchases ($6,020) to the outstanding Accounts Payable balance from December ($6,500), totaling $12,520.
Step-by-step explanation:
The question revolves around the calculation of budgeted cash payments for materials in the month of January for Fortune Company. To find this, we need to consider both the payments for new purchases made in January, and the payment for purchases made in the preceding month, December. According to the information provided, the company pays 50% of the material purchases in the month of purchase and the remaining 50% in the following month.
The January purchases amount to $12,040, of which 50% is paid in January itself, totaling $6,020. Additionally, the company has an opening Accounts Payable balance of $6,500 from December, which also needs to be paid in January. Therefore, the total budgeted cash payments for materials in January would be the sum of the payment towards January's purchases and the pending payment from December.
Hence, the budgeted cash payments for materials in January are $6,020 (January's 50% payment) + $6,500 (December's pending payment), which equals $12,520.