Question

Torres Co. forecasts merchandise purchases of \(15,800 in January, \)18,600 in February, and \(20,200 in March; 40% of purchases are paid in the month of purchase and 60% are paid in the following month. At December 31 of the prior year, the balance of accounts payable (for December purchases) is \)22,000. Prepare a schedule of cash payments for merchandise for each of the months of January, February, and March.

Short answer

The total budgeted cash payments for the month of January, February and March will be$28,320, $16,920 and $19,240.

Step-by-step solution

Introduction

The schedule of cash payments is a type of statement prepared for each month that considers the payments made by an organization in the form of cash.

Preparation of a schedule for cash payments

Torres Co.
Schedule of cash payments
For the month of January, February and March
Particulars	January	February	March
Cash payments for current month’s purchases @60%	$22,000**	$9,480	$11,160
Add: Cash payments for prior month’s purchases @40%	$6,320	$7,440	$8,080
Total budgeted cash payments	$28,320	$16,920	$19,240

**Note: The accounts payable balance (For December purchases) represents the unpaid portion, i.e., 60% of the total December sales. And it is likely to be paid in the next month, i.e., January.