Makeright & Sons 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.Given the following data,determine the cash paid to creditors during month three.
Month 1 2 3
Credit Purchases $80 000 $50 000 $70 000

Question

Quizplus · Accepted Answer

Using the information provided, we can determine how much of the credit purchases in each month are paid during month three:

- Month 1 purchases: 50% = $40,000 paid in month 1, 30% = $24,000 paid in month 2, and 20% = $16,000 paid in month 3
- Month 2 purchases: 50% = $25,000 paid in month 2, 30% = $15,000 paid in month 3, and 20% = $10,000 paid in month 4
- Month 3 purchases: 50% = $35,000 paid in month 3, 30% = $21,000 paid in month 4, and 20% = $14,000 paid in month 5

So the total amount paid to creditors during month three is:

$16,000 (from month 1 purchases) + $15,000 (from month 2 purchases) + $35,000 (from month 3 purchases) = $66,000

Therefore, the best choice is C.

Makeright & Sons Makes All of Its Purchases on Credit;