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It is November 1 of Year 1. Sales for a decorative supplies company for November, December, and January (of Year 2) are forecasted to be

It is November 1 of Year 1. Sales for a decorative supplies company for November, December, and January (of Year 2) are forecasted to be as follows:

  • November: $200,000
  • December: $800,000
  • January: $200,000

On average, the cost of goods sold is 70% of sales. During this period, the company expects inventory levels to remain constant. This means that inventory purchases are expected to equal the amount of cost of goods sold.

100% of purchases are on credit. Of the credit purchases, 5% are paid during the month of the purchase, 65% in the month following the purchase, and 30% in the second month following the purchase.

Sales for September and October of Year 1 were $100,000 and $150,000, respectively.

What is the forecasted amount of total cash payments for purchases in January?

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