Dex Industries expects to purchase $120000 of materials in March and $140000 of materials in April. Three-fourths of all purchases are paid for in the month of purchase and the other one-fourth are paid for in the month following the month of purchase. In addition a 2% discount is received for payments made in the month of purchase. How much will April's cash disbursements for materials purchases be?
A) $88200
B) $108200
C) $132900
D) $120000

Question

Quizplus · Accepted Answer

Amount to be paid in March: $120,000
Amount to be paid in April: $140,000
Total amount to be paid: $260,000

75% of the purchases will be paid in the month of purchase:
Amount to be paid in March = $90,000
Amount to be paid in April = $105,000

25% of the purchases will be paid in the month following the month of purchase:
Amount to be paid in April for March purchases = $30,000

Total amount to be paid in April = $105,000 + $30,000 = $135,000

2% discount is received for payments made in the month of purchase:
Discount for March purchases = $90,000 * 2% = $1,800
Discount for April purchases = $105,000 * 2% = $2,100

Total cash disbursement in April = $135,000 - $2,100 = $132,900

Dex Industries Expects to Purchase $120000 of Materials in March