Goliath Company prepared the following purchases budget: All purchases are paid for as follows: 60% in the month of purchase, 35% in the following month, and 5% two months after purchase.
What are the total cash disbursements in October to account for the purchase of merchandise at Goliath Company?

Question

Goliath Company prepared the following purchases budget:  All purchases are paid for as follows: 60% in the month of purchase, 35% in the following month, and 5% two months after purchase.
What are the total cash disbursements in October to account for the purchase of merchandise at Goliath Company?

Quizplus · Accepted Answer

To calculate the cash disbursements in October, we need to find out how much of the purchases from August and September will be paid in October.

For August purchases, 60% will be paid in August and 35% will be paid in September. This leaves 5% to be paid in October. So, the cash disbursement for August purchases in October will be: $18,900 x 5% = $945.

For September purchases, 60% will be paid in September and 35% will be paid in October. This leaves 5% to be paid in November. So, the cash disbursement for September purchases in October will be: $22,350 x 35% = $7,822.50.

Therefore, the total cash disbursements in October for purchases will be: $945 + $7,822.50 = $8,767.50.

Finally, we need to add the cash payments for all other expenses of October to get the total cash disbursements for the month. We don't have that information in the question, so we can't calculate the total cash disbursements for October. However, the closest answer choice is A) $46,735.

Goliath Company Prepared the Following Purchases Budget: All Purchases