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Exercise 10-27 (Algo) Cash Disbursements Budget [LO 10-4] Bond Company budgets the following purchases of direct materials for the first quarter of the year: Budgeted purchases January $115,000 February $82,000 March $102,000 All purchases of direct materials are made on credit. On average, the company pays for 80% of its purchases in the month of acquisition and the remainder in the following month. Purchases take place fairly evenly throughout the 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. 3a. Using the purchase terms in Requirement 2, calculate the opportunity cost if Bond does not decide to take advantage of the early payment discount. 3b. Can it be considered good economic policy to take advantage of early payment discounts? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B 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? Budgeted cash payment February March Reg Req 2 >

Exercise 10-27 (Algo) Cash Disbursements Budget [LO 10-4] Bond Company budgets the following purchases of direct materials for the first quarter of the year: Budgeted purchases January $115,000 February $82,000 March $102,000 All purchases of direct materials are made on credit. On average, the company pays for 80% of its purchases in the month of acquisition and the remainder in the following month. Purchases take place fairly evenly throughout the 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. 3a. Using the purchase terms in Requirement 2, calculate the opportunity cost if Bond does not decide to take advantage of the early payment discount. 3b. Can it be considered good economic policy to take advantage of early payment discounts? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B 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? Budgeted cash payment February March Reg Req 2 >

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 5PB: Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for...
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Exercise 10-27 (Algo) Cash Disbursements Budget [LO 10-4] Bond Company budgets the following purchases of direct materials for the first quarter of the year: Budgeted purchases January $115,000 February $82,000 March $102,000 All purchases of direct materials are made on credit. On average, the company pays for 80% of its purchases in the month of acquisition and the remainder in the following month. Purchases take place fairly evenly throughout the 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. 3a. Using the purchase terms in Requirement 2, calculate the opportunity cost if Bond does not decide to take advantage of the early payment discount. 3b. Can it be considered good economic policy to take advantage of early payment discounts? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B 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? Budgeted cash payment February March Reg Req 2 >
Transcribed Image Text:Exercise 10-27 (Algo) Cash Disbursements Budget [LO 10-4] Bond Company budgets the following purchases of direct materials for the first quarter of the year: Budgeted purchases January $115,000 February $82,000 March $102,000 All purchases of direct materials are made on credit. On average, the company pays for 80% of its purchases in the month of acquisition and the remainder in the following month. Purchases take place fairly evenly throughout the 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. 3a. Using the purchase terms in Requirement 2, calculate the opportunity cost if Bond does not decide to take advantage of the early payment discount. 3b. Can it be considered good economic policy to take advantage of early payment discounts? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B 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? Budgeted cash payment February March Reg Req 2 >
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