Question

ABC Company pays for raw material purchases as follows: 75 percent in the month of purchase; 25 percent in the subsequent month. Budgeted purchases are as follows: June = $56,000; July = $60,000. Cash disbursement forecast for the purchases budgeted for the month of June will be anticipated as follows: June = $___ . July = $____.

Answer 1

The cash disbursement forecast for ABC Company's budgeted purchases in June is $42,000 for June and $14,000 for July, reflecting the payment schedule of 75% in the month of purchase and 25% in the subsequent month.

Step-by-step explanation:

To forecast the cash disbursements for ABC Company based on the provided payment schedule and budgeted purchases, we need to calculate the amount paid in the month of purchase and the amount paid in the subsequent month. For the budgeted purchases in June of $56,000:

• 75% paid in June: $56,000 × 0.75 = $42,000
• 25% paid in July: $56,000 × 0.25 = $14,000

Therefore, the cash disbursement forecast for the purchases budgeted for the month of June will be:

• June: $42,000
• July: $14,000