Tang Inc makes all of its purchases on credit; 50% are paid in the month of purchase,30% during the month following the purchase and 20% in the second month following the purchase.
Month 1 Month 2 Month 3
Purchases $10 000 $12 000 $8000
The budgeted balance of creditors at the end of month 3 is:

Question

Quizplus · Accepted Answer

At the end of month 3, the creditors balance includes 20% of Month 2 purchases ($12,000 * 20% = $2,400) and 50% of Month 3 purchases ($8,000 * 50% = $4,000), totaling $6,400.

Tang Inc Makes All of Its Purchases on Credit; 50