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Question: Answer: In the question it says that they pay 20% of A/P in the month of purchase, then 80% in the following money, right.
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In the question it says that they pay 20% of A/P in the month of purchase, then 80% in the following money, right. But can someone explain why the solution applies 80% to the first month and 20% to the second month?
Fein Company provided the following information relating to cash payments. Fein purchased direct materials on account in the following amounts: June July August $68,000 77,000 73,000 a. Fein pays 20 percent of accounts payable in the month of purchase and the remaining 80 percent in the following month. 1. Payments for purchases from: April ($374,400 ~ 0.80) May ($411,200 x 0.20) Total cash needed for May $299,520 82,240 $381,760 2. Payments for purchases from: May ($411,200 ~ 0.80) June ($416,000 ~ 0.20) Total cash needed for June $328,960 83,200 $412.160Step by Step Solution
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