Alabama Corporation purchases raw materials on account from various suppliers. I

Question

Alabama Corporation purchases raw materials on account from various suppliers. It normally pays for 70 percent of these in the month purchased, 20 percent in the first month after purchase, and the remaining 10 percent in the second month after purchase. Raw materials purchases during the last five months of the year are expected to be
August.................................................................................................. $1,000,000
September ................................................................................................ 900,000
October ..................................................................................................1,250,000
November ...............................................................................................1,750,000
December.................................................................................................. 950,000

Compute the expected amount of cash payments to suppliers for the months of October, November, and December.

Explanation / Answer

August September October November December january February August $ 1,000,000 $ 700,000 $ 200,000 $ 100,000 September 900,000 630000 180000 90000 October 1,250,000 875000 250000 125000 November 1,750,000 1225000 350000 175000 December 950,000 665000 190000 95000 Total payment $ 1,155,000 1565000 1140000

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