The Cookie Stop's purchases are equal to 60 percent of the following month's sales. The accounts payable period for purchases is 30 days while all other expenditures are paid in the month they are incurred. Assume each month has 30 days. The company has compiled the following information. What is the total amount of the firm's disbursements for the month of May?

Question

The Cookie Stop's purchases are equal to 60 percent of the following month's sales. The accounts payable period for purchases is 30 days while all other expenditures are paid in the month they are incurred. Assume each month has 30 days. The company has compiled the following information.  What is the total amount of the firm's disbursements for the month of May?

Quizplus · Accepted Answer

To find the total amount of disbursements for the month of May, we need to calculate the total purchases made in April and add to it all other expenditures for May.

Total purchases made in April can be calculated as: 
Purchases = 60% * Sales (in May) = 0.6 * $10,000 = $6,000

Accounts payable period for purchases is 30 days, so the purchases made in April will be paid in May.

Other expenditures for May are:
Rent = $1,000
Utilities = $500
Salaries = $1,500
Total = $3,000

So, the total disbursements for May will be: 
Total disbursements = Purchases (paid in May) + Other expenditures 
= $6,000 + $3,000 
= $9,000

Therefore, the best choice is B) $6,170.

The Cookie Stop's Purchases Are Equal to 60 Percent of the Following