Question

41) May Company has the following information:

Month                    Budgeted Purchases

January                                      $33,000

February                                      37,000

March                                         31,000

April                                           30,000

May                                            27,680

Purchases are paid as follows:

75% in the month of purchase

25% one month after purchase

What is the expected balance in Accounts Payable on April 30?

A) 0

B) $7,500 this is the right answer. Please explain everything

C) $20,250

D) $30,000

Answer 1

Answer:

Payment for the purchases made in the current month will be paid 75% in current month and remaining 25% in the following month.

i.e, the Accounts Payable balance at the end of the month will be 25% of the purchases made in the current month.

The Accounts Payable balance on April 30 will be 25% of the purchases made in that month,

i.e, Accounts Payable 25% of Purchases

Accounts Payable 30,00025%

Therefore, Accounts Payable 7,500 USD

- Thankyou