Shorstein Manufacturing Company purchases raw materials on account each month.Purchases are paid for according to the following schedule:
30% is paid in the month of the purchase
60% is paid in the month following the purchase
10% is paid in the second month following the purchase
Budgeted purchases are as follows: $$\begin{array} { l l }
\text { March } & \$ 75,000 \
\text { April } & \$ 90,000 \
\text { May } & \$ 85,000
\end{array}$$
How much will be reported for Accounts Payable for material purchases as of the end of May?

Question

Shorstein Manufacturing Company purchases raw materials on account each month.Purchases are paid for according to the following schedule:
30% is paid in the month of the purchase
60% is paid in the month following the purchase
10% is paid in the second month following the purchase
Budgeted purchases are as follows: $$\begin{array} { l l } 
\text { March } & \$ 75,000 \
\text { April } & \$ 90,000 \
\text { May } & \$ 85,000
\end{array}$$
How much will be reported for Accounts Payable for material purchases as of the end of May?

Quizplus · Accepted Answer

To calculate the Accounts Payable at the end of May, we need to consider the unpaid portions of purchases from April and May. For April, 10% is unpaid, which is 10% of $90,000 = $9,000. For May, 60% + 10% = 70% is unpaid, which is 70% of $85,000 = $59,500. Adding these together gives $9,000 + $59,500 = $68,500.

Shorstein Manufacturing Company Purchases Raw Materials on Account Each Month March $75,000 April $90,000 May $85,000\begin{array} { l l } \text { March } & \$ 75,000 \\\text { April } & \$ 90,000 \\\text { May } & \$ 85,000\end{array} March April May ​$75,000$90,000$85,000​

Shorstein Manufacturing Company Purchases Raw Materials on Account Each Month $\begin{array} { l l } \text { March } & \$ 75,000 \\\text { April } & \$ 90,000 \\\text { May } & \$ 85,000\end{array}$