Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
-The cash disbursements in December for October purchases will be

Question

Mickle Company has the following information:
  Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
-The cash disbursements in December for October purchases will be

Quizplus · Accepted Answer

The cash disbursement for October purchases will be divided into three parts:

- 20% in October = 0.2 x $525,000 = $105,000
- 50% in November = 0.5 x $525,000 = $262,500
- 30% in December = 0.3 x $525,000 = $157,500

Therefore, the cash disbursements in December for October purchases will be $157,500. But since the question only asks for the amount of cash disbursements for October purchases, we need to add up the 20% and 50% payments that are due in October and November and subtract the 50% payment that was already made in November:

- 20% in October = $105,000
- 50% in November = $262,500
- Subtract 50% already paid in November = -$262,500 x 0.5 = -$131,250
- Total cash disbursements for October purchases in December = $105,000 - $131,250 = $65,250

Therefore, the correct answer is C.

Mickle Company Has the Following Information