Walnut Company's budgeted inventory purchases are as follows: Walnut pays for 20% of their purchases during the month of purchase, 70% during the month following the purchase, and the remaining 10% two months after the month of purchase. What is the budgeted accounts payable balance on December 31^st?

Question

Quizplus · Accepted Answer

To calculate the budgeted accounts payable balance on December 31, we need to determine the amount of purchases in each month and the payment terms for those purchases.

- Purchases in October (8307*11) = $91,377
- Purchases in November (8323*14) = $116,062
- Purchases in December (8347*18) = $150,246

For purchases made in October, Walnut pays 20% during the same month. Therefore, the accounts payable balance for October purchases is:

- Accounts payable for October purchases = $91,377 * 0.80 = $73,102

For purchases made in November, Walnut pays 20% during November and 70% during December. Therefore, the accounts payable balance for November purchases is:

- Accounts payable for November purchases = ($116,062 * 0.20) + ($116,062 * 0.70) = $109,659

For purchases made in December, Walnut pays 20% during December, 70% during January, and 10% during February. Therefore, the accounts payable balance for December purchases is:

- Accounts payable for December purchases = ($150,246 * 0.20) + ($150,246 * 0.70) + ($150,246 * 0.10) = $163,800

To calculate the budgeted accounts payable balance on December 31, we add up the accounts payable for each month:

- Budgeted accounts payable balance on December 31 = $73,102 + $109,659 + $163,800 = $346,561

Therefore, the best choice is B) $347,000, which rounds up to the nearest thousand dollars.

Walnut Company's Budgeted Inventory Purchases Are as Follows: Walnut