Streak Merchandising Company expects to purchase $60,000 of materials in July and $70,000 of materials in August.Three-quarters of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase.In addition, a 2% discount is received for payments made in the month of purchase.How much will August's cash disbursements for materials purchases be?

Question

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July's cash disbursements for materials purchases:
- $60,000 x 0.75 (paid in the month of purchase) = $45,000
- $60,000 x 0.25 (paid in the following month) = $15,000
- $45,000 - ($45,000 x 0.02) (2% discount) = $44,100

August's cash disbursements for materials purchases:
- $70,000 x 0.75 (paid in the month of purchase) = $52,500
- $70,000 x 0.25 (paid in the following month) = $17,500
- $52,500 - ($52,500 x 0.02) (2% discount) = $51,450

Therefore, the total cash disbursements for materials purchases in August would be $66,450.

Streak Merchandising Company Expects to Purchase $60,000 of Materials in July