Question

EB12.

LO 7.3Drainee purchases direct materials each month. Its payment history shows that 65% is paid in the month of purchase with the remaining balance paid the month after purchase. Prepare a cash payment schedule for January using this data: in December through February, it purchased $22,000, $25,000, and $23,000 respectively.

Answer 1

$23,950

Step-by-step explanation:

Since the Drainee is making payment for 65% of purchases in the month of purchase while the remaining balance of 35% is paid in the next month, so the Cash payment schedule of January will include 35% balance payment of purchases made during December and 65% payment of purchases made during the month of January.

Cash payment schedule for January=35%*22,000+65%*25,000

=$23,950