In: Accounting
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 $59,200. What would the firms budgeted payments be in March?
Answer)
Calculation of Budgeted payments in March
Payments done in March |
Amount |
Payments for purchases done in January ($ 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.