Question

isk Co. purchases raw materials on account. Budgeted purchase amounts are April, $96,000; May, $126,000; and June, $136,000. Payments are made as follows: 70% in the month of purchase and 30% in the month after purchase. The March 31 balance of accounts payable is $38,000. Prepare a schedule of budgeted cash payments for April, May, and June.

Answer 1

Given that Payments are made as follows: 70% in the month of purchase and 30% in the month after purchase, therefore, firstly we need to differentiate the total amount of purchases of each month into 70% and 30%. 70% of the purchases will be paid in current month and balance 30% of the purchases will be ending accounts payable for that month and paid in next month. This is shown as follows:

Particulars April May June

Current month purchases 70% $67,200 $88,200 $95,200

Ending accounts payable 30% $28,800 $37,800 $40,800

Total purchases $96,000 $126,000 $136,000

The schedule of budgeted cash payments for the month of April May and June are shown as follows:-

Schedule of Cash Payments

For April, May, and June

April May June

Cash payments for:

Current month purchases $67,200 $88,200 $95,200

Prior month purchases $38,000 $28,800 $37,800

Budgeted cash payments for materials $105,200 $117,000 $133,000