Question

Susan Wilson, Sunland & Charles Fabricators' accounts payable manager, has just received the company's direct materials purchases budget for the first quarter. The company makes all of its direct materials purchases on account. Susan's recent review of the company's payment history revealed that the company pays for 25% of its direct materials purchases in the month of purchase and 75% in the month following purchase. The compary expects to have an accounts payable balance of $18.000 on January 1 , and this amount represents the remaining payables from December's direct materials purchases: Prepare Sunland \& Charles's cash payments budget for the first Quarter. (Enter answers in necessary fields only. Leove other fields blenik Do not enter 0.) Calculate the accounts payable balance at the end of first Quarter.

Answer 1

To prepare Sunland & Charles's cash payments budget for the first quarter, you need to calculate the cash payments for direct materials purchases. The accounts payable balance at the end of the quarter can be calculated by subtracting the cash payments made during the quarter from the accounts payable balance at the beginning.

Step-by-step explanation:

To prepare Sunland & Charles's cash payments budget for the first quarter, we need to calculate the cash payments for direct materials purchases. We know that the company pays for 25% of its direct materials purchases in the month of purchase and 75% in the month following purchase. The accounts payable balance at the end of the first quarter can be calculated by subtracting the cash payments made during the quarter from the accounts payable balance at the beginning of the quarter.

Here is the step-by-step calculation:

1. Calculate the total direct materials purchases for each month by multiplying the budgeted purchases for the month by the corresponding payment percentage:January: $18,000 (remaining payables from December)
   February: $X (budgeted purchases for February) * 25%
   March: $Y (budgeted purchases for March) * 25%
2. Calculate the cash payments for each month by multiplying the total direct materials purchases for each month by the corresponding payment percentage:January: $18,000 * 25%
   February: $X * 75%
   March: $Y * 75%
3. Calculate the accounts payable balance at the end of the first quarter by subtracting the cash payments made during the quarter from the accounts payable balance at the beginning of the quarter:Accounts Payable Balance at the end of the first quarter = Accounts Payable Balance at the beginning of the quarter - Cash Payments for January - Cash Payments for February - Cash Payments for March