Barrett’s Department Store purchases a wide variety of merchandise. Purchases are made evenly throughout the month, and all are on account. On the first of every month, Barrett’s accounts payable clerk pays for all of the previous month’s purchases. Terms are 2/10, n/30 (that is, a 2 percent discount can be taken if the bill is paid within 10 days; otherwise, the entire amount is due within 30 days).

The forecast purchases for the months of May through September are as follows:

May $40,000 June 50,000 July 42,000 August 60,000 September 66,000 Required:

1. Prepare a cash payments schedule for inventory for the months of August and September.

2. Now suppose that the store manager wants to see what difference it would make to have the accounts payable clerk pay for any purchases that have been made three times per month—on the Ist, the 11th, and the 21st. Prepare a cash payments schedule for the months of August and September assuming this new payment schedule.

3. Suppose that Barrett’s accounts payable clerk does not have time to make payments on two extra days per month and that a temporary employee is hired on the 11th and 21st at $22 per hour for four hours each of those two days. Is this a good decision? Explain. lp6