Question

# New Corp began operations in January. Purchases for January, February, and March were \$40,000, \$50,000, and...

New Corp began operations in January. Purchases for January, February, and March were \$40,000, \$50,000, and \$70,000, respectively. New Corp pays 40% of each month’s purchases in the month of purchase and 60% in the following month. How much total cash will be paid in March regarding purchases

Purchases on January = \$ 40,000

Purchases on February = \$ 50,000.

Purchases on March = \$ 70,000.

It is given that 40% of each months purchase is paid on that month itself while 60% is paid on following month. So the total cash paid on March will include 40% of purchase made in March and 60% of purchase made in February.

40% of March = 70,000 x 40%

40% of March = \$ 28,000

60% of February = 50,000 x 60%.

60% of February = \$ 30,000.

Total cash paid on March = \$ 58,000.

Hence, \$ 58,000 is the correct answer.

SUMMARY:

Here, 60% of February purchase is paid on March. Also 40% of March is also paid on March.

Hence, \$ 58,000 is the correct answer.