Dry Fruit Grocers a local grocer has budgeted inventory purchases as follows: October: $300,000
November: $350,000
December: $390,000
Dry Fruit Grocers pays for 20% of their purchases during the month of purchase, 70% during the month following the purchase, and the remaining 10% two months after the month of purchase. What is the budgeted accounts payable balance on December 31?

Question

Quizplus · Accepted Answer

To calculate the budgeted accounts payable balance on December 31, we need to first calculate the amount of purchases that will be paid in each month.

For October:
- 20% of $300,000 = $60,000 will be paid in October
- 70% of $300,000 = $210,000 will be paid in November 
- 10% of $300,000 = $30,000 will be paid in January

For November: 
- 20% of $350,000 = $70,000 will be paid in November 
- 70% of $350,000 = $245,000 will be paid in December 
- 10% of $350,000 = $35,000 will be paid in February

For December: 
- 20% of $390,000 = $78,000 will be paid in December 
- 70% of $390,000 = $273,000 will be paid in January 
- 10% of $390,000 = $39,000 will be paid in March

To calculate the budgeted accounts payable balance on December 31, we need to add up the amounts that will be paid in January and February:

- January: $210,000 + $245,000 + $273,000 = $728,000 
- February: $30,000 + $35,000 + $39,000 = $104,000

Therefore, the budgeted accounts payable balance on December 31 would be:

$728,000 (January payments) + $104,000 (February payments) = $832,000

However, we are only interested in the amount that will be outstanding on December 31, so we need to subtract the payments that will have been made by that point:

- October payments: $60,000 
- November payments: $70,000 + $210,000 = $280,000 
- December payments: $78,000

$832,000 - $60,000 - $280,000 - $78,000 = $414,000

Therefore, the correct answer is B) $347,000.

Dry Fruit Grocers a Local Grocer Has Budgeted Inventory Purchases