S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May.

Multiple choice question.

$105,000


$125,000


$145,000


$135,000

To determine the cash disbursements for May, we need to calculate the amount S&P Enterprises pays in May for materials purchased in both May and April.

Here’s the breakdown:

1. **May Purchases:** 
   - 75% of May's $140,000 purchase is paid in May.
   - Calculation: $ 0.75 \times 140,000 = 105,000 $

2. **April Purchases:**
   - The remaining 25% of April's $120,000 purchase is paid in May.
   - Calculation: $ 0.25 \times 120,000 = 30,000 $

3. **Total Disbursements for May:**
   - $ 105,000 + 30,000 = 135,000 $

Therefore, the expected cash disbursement for May is **$135,000**.

**Answer: $135,000**

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Would you like further explanation on how the cash disbursements were calculated? 

Here are some related questions to deepen understanding:

1. How would cash disbursements for June change if June purchases were $180,000?
2. What is the total cash disbursement for April if S&P Enterprises follows the same payment policy?
3. How does a change in the payment percentage affect monthly cash disbursements?
4. If purchases in July are projected at $200,000, what is the cash disbursement for July?
5. What impact does delaying payments by an additional month have on cash flow?

**Tip:** When handling cash disbursement schedules, carefully separate payments by month based on the company’s policy to avoid overlap.

S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May, and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May. 

Options: 
$105,000 
$125,000 
$145,000 
$135,000

Calculate the expected cash disbursements for S&P Enterprises in May, with purchases scheduled at $120,000 in April, $140,000 in May, and $160,000 in June. Learn how to apply percentage-based cash flow rules for accurate monthly expense projections. Perfect for students in Grades 9-12 learning practical financial math.

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