The Projections of Direct Materials Purchases That Follow Are for the Sombo

question 12

Multiple Choice

The projections of direct materials purchases that follow are for the Sombo Corporation. The company pays for 60 percent of purchases on account in the month of purchase and 40 percent in the month following the purchase.
-What is the expected cash payment for direct materials for the month of February of Sombo?

• A)$52,000
• B)$72,000
• C)$89,000
• D)$95,000

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Definitions:

Net Investment

The total amount spent by a company for purchasing new assets, after accounting for depreciation.

Gross Investment

The total amount spent on purchases of new capital and on replacing depreciated capital within an economy.

Net Investment

The sum of money used to purchase new capital assets, subtracting the depreciation from current capital assets.

Depreciation

The reduction in the value of an asset over time, due in particular to wear and tear.