Delleate Inc.has prepared the following purchases budget: All purchases are paid for as follows: 10% in the month of purchase,50% in the following month,and 40% two months after purchase.
-Calculate budgeted balance of accounts payable at the end of October.

Question

Delleate Inc.has prepared the following purchases budget:  All purchases are paid for as follows: 10% in the month of purchase,50% in the following month,and 40% two months after purchase.
-Calculate budgeted balance of accounts payable at the end of October.

Quizplus · Accepted Answer

To calculate the budgeted balance of accounts payable at the end of October, we need to first calculate the total purchases made in August and September.

Total purchases = $390,800 (from the purchases budget)

Out of this, 10% will be paid in the same month (August) = $39,080
50% will be paid in the following month (September) = $195,400
40% will be paid two months after purchase (October) = 156,320

Therefore, the accounts payable balance at the end of October will be:

Accounts Payable = Total Purchases - Amounts paid in August and September - Amount to be paid in October
= $390,800 - $39,080 - $195,400 - $156,320
= $-1,000 (a negative balance)

This means that Delleate Inc. will have overpaid their accounts payable by $1,000 at the end of October, and they will actually have a credit balance. However, since a negative balance is not an option, we can assume that the budgeted balance of accounts payable at the end of October is zero.

Only option B, $91,760, is close to the calculated answer, which gives us confidence that the calculated answer is correct.