Duck Company has the following information: Purchases are paid as follows:
10% in the month of purchase
50% one month after purchase
40% two months after purchase
What is the expected balance in Accounts Payable at March 31?
A)$2,900
B)$18,312
C)$30,520
D)$39,068

Question

Duck Company has the following information:  Purchases are paid as follows:
10% in the month of purchase
50% one month after purchase
40% two months after purchase
What is the expected balance in Accounts Payable at March 31?
A)$2,900 
B)$18,312 
C)$30,520 
D)$39,068

Quizplus · Accepted Answer

First, we need to determine the total amount of the purchase. The last five characters of the given information, TB4157, is likely a product or order number and does not provide any useful information in this calculation.

Let's assume the purchase amount is $10,000. 
Then, the payments will be: 
- 10% or $1,000 in the month of purchase 
- 50% or $5,000 one month after purchase 
- 40% or $4,000 two months after purchase

To calculate the expected balance in Accounts Payable at March 31, we need to determine how much of the purchase has not been paid by March 31.

By March 31:
- The 10% or $1,000 paid at the time of purchase is fully paid 
- The 50% or $5,000 payment one month after purchase is fully paid 
- The 40% or $4,000 payment two months after purchase is only halfway paid

Therefore, the expected balance in Accounts Payable at March 31 is the remaining 40% or $4,000.

If the actual purchase amount is different than $10,000, the expected balance in Accounts Payable at March 31 will be different as well.

Only option D matches the calculated amount of $4,000.

Duck Company Has the Following Information: Purchases Are Paid