Cash Disbursements Budget Bond Company budgets the following purchases of direct materials for the first quarter of the year:January February MarchBudgeted purchases $150,000 $120,000 $90,000All purchases of direct materials are made on credit. On average, the company pays 80% of itspurchases in the month of sales and the remainder in the following month.Required1. For the months of February and March, what are the budgeted cash payments for purchases of directmaterials under the assumption that there is no (cash) discount for early payment?2. For the months of February and March, what are the budgeted cash payments for purchases of directmaterials under the assumption that the purchase terms are 2/15, net 30? The company’s policy is to takeadvantage of all cash discounts for early payment.3. Provide an economic argument as to why it may be good (economic) policy to take advantage of earlypayment discounts, as in requirement 2.
Cash Disbursements Budget Bond Company budgets the following purchases of direct materials for the first quarter of the year:
January February March
Budgeted purchases $150,000 $120,000 $90,000
All purchases of direct materials are made on credit. On average, the company pays 80% of its
purchases in the month of sales and the remainder in the following month.
Required
1. For the months of February and March, what are the budgeted cash payments for purchases of direct
materials under the assumption that there is no (cash) discount for early payment?
2. For the months of February and March, what are the budgeted cash payments for purchases of direct
materials under the assumption that the purchase terms are 2/15, net 30? The company’s policy is to take
advantage of all cash discounts for early payment.
3. Provide an economic argument as to why it may be good (economic) policy to take advantage of early
payment discounts, as in requirement 2.
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