Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: Material purchases
$$\begin{array} { l l c }
\text { January } & \text { February } & \text { March } \
\$ 12,040 & \$ 14,150 & \$ 10.970
\end{array}$$ Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,500. The expected January 31 Accounts Payable balance is:

Question

Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: Material purchases
 $$\begin{array} { l l c } 
\text { January } & \text { February } & \text { March } \
\$ 12,040 & \$ 14,150 & \$ 10.970
\end{array}$$ Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,500. The expected January 31 Accounts Payable balance is:

Quizplus · Accepted Answer

To calculate the accounts payable balance for January, we need to calculate the total amount of purchases to be made in November and December.

November purchases: $25,000 x 30% = $7,500 
December purchases: $30,000 x 50% = $15,000

Total purchases: $7,500 + $15,000 = $22,500

Since payments are made 50% in the month of purchase and 50% the following month, we need to calculate the payments for November and December purchases:

November payments: $7,500 x 50% = $3,750 
December payments: $15,000 x 50% = $7,500

Total payments: $3,750 + $7,500 = $11,250

To find the accounts payable balance for January, we need to subtract the payments made from the total purchases:

Total purchases: $22,500 
Payments made: $11,250 
Accounts payable balance: $22,500 - $11,250 = $11,250

However, we also need to take into account the fact that the December accounts payable balance is already $6,500. So the expected January 31 accounts payable balance is:

$11,250 + $6,500 = $17,750

Since $17,750 is not one of the answer choices, the best choice is B, which is the closest answer to the calculated amount of $17,750.

Fortune Company's Direct Materials Budget Shows the Following Cost of Materials