Calculating accounts payable for end of year


Problem:

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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Accounting Basics: Calculating accounts payable for end of year
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