The following information for the second quarter of 2011 pertains to Huffington Company:

•Cash is collected from customers in the following manner:

•40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
•Labor costs are 20% of sales. Other operating costs are $45,000 per month (including $12,000 of depreciation). Both of these are paid in the month incurred.
•The cash balance on June 1 is $6,000. A minimum cash balance of $4,500 is required at the end of the month. Money can be borrowed in multiples of $3,000.
•No loans outstanding on June 1.
-How much cash will be paid to suppliers in June?
A)$69,600
B)$56,000
C)$88,000
D)None of the above is correct.

Question

The following information for the second quarter of 2011 pertains to Huffington Company:
  
•Cash is collected from customers in the following manner:
  
•40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
•Labor costs are 20% of sales. Other operating costs are $45,000 per month (including $12,000 of depreciation). Both of these are paid in the month incurred.
•The cash balance on June 1 is $6,000. A minimum cash balance of $4,500 is required at the end of the month. Money can be borrowed in multiples of $3,000.
•No loans outstanding on June 1.
-How much cash will be paid to suppliers in June?
A)$69,600 
B)$56,000 
C)$88,000 
D)None of the above is correct.

Quizplus · Accepted Answer

A)(May purchases $60,000 × 60% = $36,000)+ (June purchases $84,000 × 40% = $33,600)= $69,600

The Following Information for the Second Quarter of 2011 Pertains