The projections of direct materials purchases that follow are for the Sombo Corporation. $\begin{array}{lll}
&\text { Purclases on Account}&\text { Cash Purchases }\
\text { December } & \$ 40,000 & \$ 30,000 \
\text { January } & 60,000 & 33,000 \
\text { February } & 50,000 & 35,000 \
\text { March } & 70,000 & 25,000
\end{array}$
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The company pays for 60 percent of purchases on account in the month of purchase and 40 percent in the month following the purchase. What is the expected cash payment for direct materials for the month of January?

Question

The projections of direct materials purchases that follow are for the Sombo Corporation. $\begin{array}{lll}
&\text { Purclases on Account}&\text {  Cash Purchases }\
\text { December } & \$ 40,000 & \$ 30,000 \
\text { January } & 60,000 & 33,000 \
\text { February } & 50,000 & 35,000 \
\text { March } & 70,000 & 25,000
\end{array}$
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 The company pays for 60 percent of purchases on account in the month of purchase and 40 percent in the month following the purchase. What is the expected cash payment for direct materials for the month of January?

Quizplus · Accepted Answer

For January, the expected cash payments for direct materials include cash purchases for January ($33,000) plus 60% of January's purchases on account ($60,000 * 60% = $36,000) and 40% of December's purchases on account ($40,000 * 40% = $16,000). Adding these together gives $33,000 + $36,000 + $16,000 = $85,000.

The Projections of Direct Materials Purchases That Follow Are for the Sombo