Question

Dex Industries expects to purchase $120,000 of materials in March and $140,000 of materials in April. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. In addition, a 2% discount is received for payments made in the month of purchase. How much will April's cash disbursements for materials purchases be?

Answer 1

To calculate the cash disbursements for April's material purchases, we need to consider that three-fourths of the purchases are paid for in the month of purchase, and the remaining one-fourth are paid for in the following month. Additionally, a 2% discount is received for payments made in the month of purchase. Therefore, the cash disbursement for April's material purchases will be $34,300.

Step-by-step explanation:

To calculate the cash disbursements for April's material purchases, we need to consider that three-fourths of the purchases are paid for in the month of purchase, and the remaining one-fourth are paid for in the following month. Additionally, a 2% discount is received for payments made in the month of purchase.

In March, Dex Industries will purchase $120,000 of materials. Since three-fourths of the purchases are paid for in the same month, the cash disbursement would be $120,000 * 0.75 = $90,000. As Dex Industries will pay in the month of purchase, there is no discount to consider.

In April, Dex Industries will purchase $140,000 of materials. Since one-fourth of the purchases are paid for in the following month, the cash disbursement would be $140,000 * 0.25 = $35,000. However, since Dex Industries will pay in the month of purchase, they will receive a 2% discount. Therefore, the cash disbursement for April's material purchases will be $35,000 - ($35,000 * 0.02) = $34,300.