Question

Clinton Retailers expects to make inventory purchases in the next quarter as follows:

April		$58,400
May		69,800
June		95,500

Prior experience has shown that 80 percent of a month’s purchases are paid in the month of purchase and 20 percent are paid in the month following purchase. March purchases were $52,300.

Estimate cash disbursements related to purchases for April, May, and June.

Cash disbursements for purchases	April		May		June
Payment of March purchases	$		$		$
Payment of April purchases
Payment of May purchases
Payment of June purchases
	$		$		$

Answer 1

Answer:

Cash disbursements for purchases	April	May	June
Payment of March purchases	$10,460
Payment of April purchases	$46,720	$11,680
Payment of May purchases		$55,840	$13,960
Payment of June purchases			$76,400
Total cash disbursements	$57,180	$67,520	$90,360

Calculations:

Cash disbursements for purchases	Credit purchase	% of payment	April	May	June
Payment of March purchases	$52,300	20%	$10,460
Payment of April purchases	$58,400	80%	$46,720
		20%		$11,680
Payment of May purchases	$69,800	80%		$55,840
		20%			$13,960
Payment of June purchases	$95,500	80%			$76,400
Total			$57,180	$67,520	$90,360