If all purchases of goods for sale are on 45 day (one and one-half months) credit terms with the supplier, cash flows to purchases in June would be $425,000; March, April, May, and June purchases budgets are $350,000, $400,000, $450,000, and $450,000, respectively.

Question

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The cash flow for purchases in June would be the payment for purchases made in April, as the credit terms are 45 days. The April purchases budget is $400,000, which matches the cash flow stated.

If All Purchases of Goods for Sale Are on 45