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I don't think I got first 2 months right. Please help me Morgan Co. purchases raw materials on account. Morgan's policy is to take advantage
I don't think I got first 2 months right. Please help me
Morgan Co. purchases raw materials on account. Morgan's policy is to take advantage of discounts and pay in the month following the purchase. Some of Morgan's suppliers do not offer discounts and require payment within the month of purchase. Other suppliers sell on credit terms of 2/10 net 30, which means that Morgan can take a 2% discount and pay 98% of the invoiced amount if the invoice is paid within 10 days. If the invoice is not paid within 30 days of making the purchase, then Morgan must pay the full amount (100%) of the invoice. Remember, if Morgan elects not to take advantage of the discount, then it is good financial practice to delay the payment of an invoice until just before it is due. At the beginning of the year, Morgan's account payable balance is $70,000. All available discounts have been taken, and the balance will be paid in January. Given the following planned purchases for the next few months, determine the amount of cash that must be available each month to pay for the firm's purchases: Planned Purchases Discounted at 2/10 Net 30 Planned Purchases without Discounts Monthly Cash Requirement $70,000 January 70,000 30,000 February 40,000 60,000 $69,200 March 70,000 30,000Step by Step Solution
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