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In: Accounting

The following payment pattern is 16% in the month of purchase, 33% in the month following...

The following payment pattern is 16% in the month of purchase, 33% in the month following purchase, and the remainder in the 2nd month after purchase. Purchases for each month are JAN $51,665, FEB $51,441, and March $59,200. What would the firms budgeted payments be in March?

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Expert Solution

Answer)

Calculation of Budgeted payments in March

Payments done in March

Amount

Payments for purchases done in January ($ 51,665 X 51%)

$ 26,349.15

Payments for purchases done in February ($ 51,441 X 33%)

$ 16,975.53

Payments for purchases done in March ($ 59,200 X 16%)

$    9,472.00

Total Payments to be done in March

$ 52,796.68

Therefore total budgeted payments to be done in March is $ 52,796.68.

Working Notes:

As per Company’s policy, payments are made as follows:

· 16% in the month of purchase,

· 33% in the month following purchase,

· Balance 51% in 2nd Month after purchase.

Payment for Purchase in JANUARY will be made as follows:

· 16% in January.

· 33% in February.

· Balance 51% in March.

Payment for Purchase in FEBRUARY will be made as follows:

· 16% in February.

· 33% in March.

· Balance 51% in April.

Payment for Purchase in MARCH will be made as follows:

· 16% in March.

· 33% in April.

· Balance 51% in May.

Accordingly budgeted payment to be done March will include:

· 51% of purchases in the month of January.

· 33% of purchases in the month of February.

· 16% for Purchase in March.


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