Cash and treasury management practise question

Pinaaa

I am getting confused with how the answers have come about in the attached question. Can someone please advise?

Answers:
April 196,200
May 237,075
June 400,575
July 400,575

ncacat

Lets approach this step by step

• The total purchases planned for 4 months is split equally to take advantage of the payment discount.
  
• That's £1,635,000 split equally for the 4 months. £408,750 each.
  
• That's the liability.
  
• Now, Clifton has decided to pay only the 50% in the month of purchase.
  
• April:
  • 408750 X 50% X 96% (4% discount) = £196,200
    
• May:
  • 408750 X 50% X 96% (4% discount)
    
  • + £39240 X 100/96 (10% of April months liability but with no discount) = £237,075
    
• June:
  • 408750 X 50% X 96% (4% discount)
    
  • + £39240 X 100/96 (10% of May months liability but with no discount)
    
  • + £156960 X 100/96 (40% of April months liability but with no discount) = £400,575
    
• July:
  • 408750 X 50% X 96% (4% discount)
    
  • + £39240 X 100/96 (10% of June months liability but with no discount)
    
  • + £156960 X 100/96 (40% of May months liability but with no discount) = £400,575