Question

IP Company pays for purchases of materials in full in the month following the purchase. During the previous month, IP had purchases of $25,000. During the current month, IP had purchases of $30,000. The amount that IP will pay during the current month for purchases is:__________

Answer 1

IP Company will pay $30,000 for purchases during the current month.

Step-by-step explanation:

IP Company pays for purchases of materials in full in the month following the purchase. Therefore, the amount that IP will pay during the current month for purchases is equal to the purchases made during the previous month. In this case, IP had purchases of $30,000 in the current month, so they will pay $30,000 for purchases during the current month.

Answer 2

Direct material current month= $25,000

Step-by-step explanation:

Giving the following information:

Previous month= $25,000

Current month= $30,000

The company pays the total cost of material in the month following the purchase. Therefore, in the current month, IP will pay the cost of the previous month:

Direct material current month= $25,000