Holmes Manufacturing Inc. had the following purchases budgeted for the last six months of 2013: Holmes pays one-half of a month's purchases in the month of purchase and the remainder in the following month. What are expected total cash disbursements for the last quarter of 2013?
A) $112,500
B) $225,000
C) $182,500
D) $208,500

Question

Holmes Manufacturing Inc. had the following purchases budgeted for the last six months of 2013:  Holmes pays one-half of a month's purchases in the month of purchase and the remainder in the following month. What are expected total cash disbursements for the last quarter of 2013?
A) $112,500 
B) $225,000 
C) $182,500 
D) $208,500

Quizplus · Accepted Answer

To find the expected total cash disbursements for the last quarter of 2013, we need to calculate the purchases for October, November, and December, and then apply the payment terms.

Purchases for the Last Quarter:
October: $75,000
November: $150,000
December: $120,000

Half of October's purchases are paid in October, and the other half is paid in November. 
Half of November's purchases are paid in November, and the other half is paid in December. 
Half of December's purchases are paid in December, and the other half is paid in January (not part of the last quarter).

Expected cash disbursements:
October: $37,500 ($75,000/2)
November: $112,500 ($37,500 from October + $75,000 from November/2)
December: $75,000 ($37,500 from November + $120,000/2)

Total expected cash disbursements for the last quarter of 2013:
$225,000 ($37,500 + $112,500 + $75,000)

Therefore, the best choice is D.