Purchases: Oct $125,000, Nov $250,000, Dec $30,000. Payment pattern: 50 % month of purchase, 35 % next, 15 % second. What are forecasted October cash payments?

Rationale

$62,500 is the forecasted October cash payments.

To calculate the forecasted cash payments for October, we consider the payment pattern based on purchases made in October, November, and December. According to the payment structure, 50% of the October purchases will be paid in the same month, which is the primary component of the forecast for cash payments.

A ($18,750) YOUR ANSWER

This amount represents 15% of the purchases made in December ($30,000), which is not relevant to the October cash payments. It does not account for any portion of the October purchases or the payment structure for the forecast.

B ($62,500) CORRECT

This is the correct answer. It is calculated as 50% of the October purchases ($125,000), equating to $62,500. This amount reflects the cash payment that will be made in October for the purchases incurred in that same month.

C ($78,750) YOUR ANSWER

This figure inaccurately combines different percentages from multiple months. It does not represent any valid calculation under the given payment pattern and instead misapplies the percentages to the purchases.

D ($152,500) YOUR ANSWER

This total incorrectly suggests that all purchases from October ($125,000), November ($250,000), and December ($30,000) are being paid in October. This misinterpretation disregards the specified payment percentages and leads to an inflated total.

Conclusion

The forecasted cash payments for October are determined solely from the purchases made that month, aligning with the established payment pattern. In this case, 50% of the $125,000 in purchases results in a forecast of $62,500 for cash payments in October. Other choices either miscalculate or misinterpret the payment structure, failing to capture the correct financial forecast.

Purchases: Oct $125,000, Nov $250,000, Dec $30,000. Payment pattern: 50 % month of purchase, 35 % next, 15 % second. What are forecasted October cash payments?

$62,500 is the forecasted October cash payments.

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