URGENT *** Assessment 2 task 4

paige08x

Hi All,

I have an exam in the morning and I'm really stuck on the practise assessment 2 Q4.
Please could you help me work this out?

scamp83

@paige08x Sorry I didn't see this earlier in time for your exam but hopefully it might help someone else at some point....
To take advantage of the 3.5% settlement discount they are spreading the purchases out over 4 months (so 480+560+520+540 / 4 = £525,000 per month).
In the first month (Apr) they are paying 60% of the April £525k less the 3.5% discount (so £315,000 - 3.5% = £303,975).
In the second month (May) they are paying the same amount again (the 60% May purchases) plus 5% of the April account (so £303,975 + £26,250 = £330,225)
In the third month (June) they are paying both of the above plus the remainder of the April account (£525,000 x 35% = £18,3750). So £303,975 + £26,250 + £18,3750 = £513,975
In the fourth month (July) they are paying 60% of the July purchases less the 3.5% discount (£303,975) plus 5% of the June purchases (£525,000 x 5%) and 35% of the June purchases (£525,000 x 35%) so £303,975 + £26,250 + £183,750 = £513,975.
It's a little difficult to describe without drawing a table up but I hope that helps in some way!
PS I hope your exam went well, I had mine last week.... it was pretty brutal!

Kinglee89

@scamp83 thank you for clearing this up for me. I have just finished the mock and I couldn't work out where I went wrong. I was working it out on a month by month basis!

petitechocoholic

Where does the £26250 come from?

scamp83

5% of the £525,000