Question

EA12.

LO 7.3Desiccate purchases direct materials each month. Its payment history shows that 70% is paid in the month of purchase with the remaining balance paid the month after purchase. Prepare a cash payment schedule for March if in January through March, it purchased $35,000, $37,000, and $39,000, respectively.

Answer 1

$38,400

Step-by-step explanation:

1. Cash Purchases:

The total purchases in the month of March is of $35,000.

It is given that 70% of Purchases are for cash.

Hence, 70% of $35,000 would be;

$39,000 x 0.70

$27,300

2. Credit Purchases:

Remaining Balance of Purchases from the month of February:

For the month of February Cash Purchases can be calculated as follows;

$37,000 x 0.70

$25,900

Remaining Balance to be paid in March for the month of February can be calculated as follows;

$37,000 - $25,900

$11,100

3. CASH PAYMENT for PURCHASES in MARCH:

Cash Purchases = $27,300

Credit Purchases = $11,100

Hence;

Cash Payment for purchases in March = Cash Purchases + Credit Purchases

Cash Payment for purchases in March = $27,300 + $11,100

Cash Payment for purchases in March = $38,400