Question

Preparing an Accounts Payable Schedule Pilsner Inc. purchases raw materials on account for use in production. The direct materials purchases budget shows the following expected purchases on account: April $374,400 May 411,200 June 416,000 Pilsner typically pays 25% on account in the month of billing and 75% the next month.Required: 1. How much cash is required for payments on account in May?
2. How much cash is expected for payments on account in June?

Answer 1

Answer:

1. $383 300 is due for the month of May.

2. $412 400 is due for the month of June

Explanation:

1. May = ($374000 * 75% from April purchases) + ($411 200 * 25% from May purchases)

= $280 500 + $102 800  

= $383 300 is due for the month of May

2. June = ($411 200 * 75% from May purchases) + ($416 000 * 25% from June purchases)  

= $308 400 + $104 000

= $412 400 is due for the month of June

Answer 2

Answer:

1. Cash required for payment in May - $383,600

2. Cash expected for payment in June - $412,400

Explanation:

Payments are made in two parts for the purchase of direct materials. From which 25% is being paid in the same month as bill and remainder (75%) in the next month. Therefore, the cash required for May would be calculated as follows:

$411,200 x 25% = $102,800 (Payment made same month)

$374,400 x 75% = $280,800 (Payment for the previous month, April)

Cash Required for payment in May is $383,600 ($102,800 + $280,800)

Cash expected for payments for June would be as follows:

$416,000 x 25% = $104,000 (Payment made same month)

$411,200 x 75% = $308,400 (Payment for the previous month, May)

Cash Expected for payment in June is $412,400 ($104,000 + $308,400)