Calder Water Company has budgeted direct materials inventory purchases as follows:
October: $300,000
November: $350,000
December: $410,000
Calder pays for 10% of their purchases during the month of purchase,70% during the month following the purchase,and the remaining 20% two months after the month of purchase.What is the budgeted accounts payable balance on December 31?

Question

Calder Water Company has budgeted direct materials inventory purchases as follows: 
October: $300,000
November: $350,000
December: $410,000
Calder pays for 10% of their purchases during the month of purchase,70% during the month following the purchase,and the remaining 20% two months after the month of purchase.What is the budgeted accounts payable balance on December 31?

Quizplus · Accepted Answer

To calculate the budgeted accounts payable balance on December 31, we need to first calculate the accounts payable for each month.

For October: 
10% of $300,000 = $30,000 (paid during the month of purchase) 
70% of $300,000 = $210,000 (paid during the month following purchase) 
20% of $300,000 = $60,000 (paid two months after purchase)

Total accounts payable for October: $300,000

For November: 
10% of $350,000 = $35,000 (paid during the month of purchase) 
70% of $350,000 = $245,000 (paid during the month following purchase) 
20% of $350,000 = $70,000 (paid two months after purchase)

Total accounts payable for November: $350,000

For December: 
10% of $410,000 = $41,000 (paid during the month of purchase) 
70% of $410,000 = $287,000 (paid during the month following purchase) 
20% of $410,000 = $82,000 (paid two months after purchase)

Total accounts payable for December: $410,000

To find the budgeted accounts payable balance on December 31, we need to add up all the amounts that will still be owed on December 31:

$60,000 from October 
$245,000 from November 
$82,000 from December

Total budgeted accounts payable balance on December 31: $387,000

Therefore, the best choice is B) $439,000.

Calder Water Company Has Budgeted Direct Materials Inventory Purchases as Follows