Della Company prepared the following purchases budget: All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase.
What are the total cash payments made in August for purchases?

Question

Della Company prepared the following purchases budget:  All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase.
What are the total cash payments made in August for purchases?

Quizplus · Accepted Answer

To calculate the total cash payments made in August, we need to look at the purchases made in June and July, since 10% of those purchases are paid in August.

From the purchases budget, the total purchases made in June and July are:
June: $198,000
July: $152,000

10% of June purchases is $19,800 (paid in August) 
10% of July purchases is $15,200 (paid in August)

Therefore, the total cash payments made in August for purchases is:
$19,800 + $15,200 = $35,000

Option B is the closest to this amount at $70,680.

Della Company Prepared the Following Purchases Budget: All Purchases