Thomario's Powder Coatings makes payments on its inventory purchases as follows: 25% in the month of purchase,60% in the following month,and 15% in the second month following purchase.Budgeted inventory purchases for June,July,and August are $15,000,$19,000 and $24,000,respectively.At what amount are cash payments for inventory in August budgeted?

Question

Quizplus · Accepted Answer

To find out how much cash payments for inventory in August are budgeted, we need to look at how much of the inventory purchases for June, July, and August will be paid in August.

For the June purchases, 25% will be paid in June, 60% will be paid in July, and 15% will be paid in August. This means that 15% of $15,000, or $2,250, will be paid in August for the June purchases.

For the July purchases, 25% will be paid in July, 60% will be paid in August, and 15% will be paid in September. This means that 60% of $19,000, or $11,400, will be paid in August for the July purchases.

For the August purchases, 25% will be paid in August, 60% will be paid in September, and 15% will be paid in October. This means that 25% of $24,000, or $6,000, will be paid in August for the August purchases.

Adding these amounts together, we get a total of $19,650 in cash payments for inventory in August. Therefore, the best choice is B.

Thomario's Powder Coatings Makes Payments on Its Inventory Purchases as Follows