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    Calculating accounts payable for end of year

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    I need help understanding this question:

    Acmal Manufacturing Company is estimating the following raw material purchases for the last four months of the year:
    September $850,000
    October $900,000
    November $810,000
    December $780,000

    At Acmal, 25% of raw materials purchases are normally paid for in the month of purchase. The remaining 75% is paid for in the month following the purchase.

    In Acmal's budgeted balance sheet at December 31, at what amount will accounts payable be shown? (Assume that accounts payable is only used for raw material purchases.)
    A) $585,000
    B) $607,500
    C) $780,000
    D) $802,500

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    In December the outstanding payments (accounts payable) would be ...

    Solution Summary

    The solution explains how to calculate the balance in the accounts payable account at the end of the year