Question

It is January 1 of Year 2. Purchases for Yosef Company for January, February, and March are forecasted to be as follows: January, $200,000; February $400,000; March, $500,000. 40% of purchases are for cash. Of the credit purchases, 30% are paid during the month of the purchase, 50% in the month following the purchase, and 20% in the second month following the purchases. TOTAL purchases for November and December of Year 1 were $200,000 and $400,000, respectively. What is the forecasted amount of total CASH PAYMENTS FOR PURCHASES in March?

Note: This is the sum of immediate payments from cash purchases, same-month cash payments of credit purchases, and cash payments for credit purchases made in prior months.

$460,000

$434,000

$374,000

$472,000

$348,000

Answer 1

	January	February	March
Total purchases	200,000	400,000	500,000
Cash purchases (40%)	80,000	160,000	200,000
Credit purchases (60%)	120,000	240,000	300,000

Schedule of Expected Cash Payment (For March)
Cash purchases	200,000
Cash paid for January purchases ( 120,000 x 20%)	24,000
Cash paid for February purchases ( 240,000 x 50%)	120,000
Cash paid for March purchases (300,000 x 30%)	90,000
Total cash payments	434,000

Second option is correct.