Arkansas Corporation purchases raw materials on account from various suppliers.

Question

Arkansas 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

Required:

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

August $1,000,000 September $900,000 October $1,250,000 November $1,750,000 December $950,000

Explanation / Answer

Answer:

Particulars August September October November December Raw material purchases 1000000 900000 1250000 1750000 950000 Payment: 70% in the month purchased 700000 630000 875000 1225000 665000 20% in the first month after purchase 200000 180000 250000 350000 10% in the second month after purchase 100000 90000 125000 Total payment 700000 830000 1155000 1565000 1140000

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