Question

Lough Company prepared the following purchases​ budget: Month Budgeted Purchases June $ 45 comma 000 $45,000 July $ 41 comma 000 $41,000 August $ 38 comma 500 $38,500 September $ 47 comma 000 $47,000 October $ 50 comma 000 $50,000 All purchases are paid for as​ follows: 20 20​% two months after​ purchase, 45 45​% in the following​ month, and 35 35​% in the month of purchase. What are the total cash disbursements in October to account for the purchase of merchandise at Lough​ Company? A. $ 17 comma 500 $17,500 B. $ 40 comma 925 $40,925 C. $ 46 comma 350 $46,350 D. $ 38 comma 650

Answer 1

The company has a policy that pays for purchase as 35% in the same month of purchase, 45% in the following month and 20% after the two months of purchase. This means for the disbursement in the month of October will be 35% of the purchase of October plus 45% of the month of purchase of September and 20% of the month of purchase of August.

Therefore, total disbursement in the month of October:

35% of Purchase of October = $50,000*35% = $17,500

45% of Purchase of September = $47,000*45% = $21,150

20% of Purchase of August = $38,500*20% = $7,700

Total disbursement in the month of October = $17,500 + $21,150 +$7,700 = $46,350

Therefore, option C $46,350 is the correct answer.