Galina, Inc. has prepared the following direct materials purchases budget: $$\begin{array} { | l | r | }
\hline \text { Month } & { \begin{array} { c }
\text { Budgeted DM } \
\text { Purchases }
\end{array} } \
\hline \text { June } & \$ 68,000 \
\hline \text { July } & 79,500 \
\hline \text { August } & 78,400 \
\hline \text { September } & 76,300 \
\hline \text { October } & 72,400 \
\hline
\end{array}$$ All purchases are paid for as follows: 40% in the month of purchase, 50% in the following month, and 10% two months after purchase. Calculate the budgeted balance of accounts payable at the end of October.

Question

Galina, Inc. has prepared the following direct materials purchases budget: $$\begin{array} { | l | r | } 
\hline \text { Month } & { \begin{array} { c } 
\text { Budgeted DM } \
\text { Purchases }
\end{array} } \
\hline \text { June } & \$ 68,000 \
\hline \text { July } & 79,500 \
\hline \text { August } & 78,400 \
\hline \text { September } & 76,300 \
\hline \text { October } & 72,400 \
\hline
\end{array}$$ All purchases are paid for as follows: 40% in the month of purchase, 50% in the following month, and 10% two months after purchase. Calculate the 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 calculate the total purchases that Galina, Inc. will make in September and October and then subtract the amounts paid during those months.

Total purchases in September:
10,000 yards × $6 per yard = $60,000

Total purchases in October:
12,000 yards × $7 per yard = $84,000

Total purchases = $60,000 + $84,000 = $144,000

Amount paid in September:
40% of $60,000 = $24,000

Amount paid in October:
50% of $60,000 = $30,000
40% of $84,000 = $33,600

Total amount paid = $24,000 + $30,000 + $33,600 = $87,600

Budgeted balance of accounts payable at the end of October:
Total purchases - Amount paid = $144,000 - $87,600 = $56,400

Therefore, the best choice is B, $51,070.

Galina, Inc All Purchases Are Paid for as Follows: 40% in the \begin{array}