Question

Expected direct materials purchases in Rees Company are $210,000 in the first quarter and $270,000 in the second quarter. Forty percent of the purchases are paid in cash as incurred, and the balance is paid in the following quarter. The budgeted cash payments for purchases in the second quarter are: a) $288,000. b) $270,000. c) $216,000. d) $234,000.

Answer 1

The budgeted cash payments for purchases in the second quarter are $270,000.

The answer is option ⇒b

Step-by-step explanation:

To determine the budgeted cash payments for purchases in the second quarter, we need to consider the payment terms. According to the information provided, 40% of the purchases are paid in cash as incurred, and the balance is paid in the following quarter.

So, for the first quarter purchases of $210,000, 60% ($126,000) will be paid in the second quarter.

For the second quarter purchases of $270,000, 40% ($108,000) will be paid in cash as incurred, and 60% ($162,000) will be paid in the third quarter.

Therefore, the budgeted cash payments for purchases in the second quarter would be $108,000 + $162,000 = $270,000.

The answer is option ⇒b