Cave Hardware's forecasted sales for April; May; June; and July are $250,000; $290,000; $180,000; and $300,000;...
Cave Hardware's forecasted sales for April; May; June; and July are $250,000; $290,000; $180,000; and $300,000; respectively. Sales are 60% cash and 40% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 80% of sales and ending inventory is maintained at $50,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 26% in the month of purchase and 74% in the following month.
What is the balance of accounts payable on the June 30 budgeted balance sheet at Cave Hardware?
A. $133,200
B. $153,600
C. $113,664
D. $95,904
Homework Answers
Solution:
| Computation of Inventory Purchases | ||||
| Particulars | April | May | June | July |
| Sales | $2,50,000 | $2,90,000 | $1,80,000 | $3,00,000 |
| Cost of goods sold (80% of sales) | $2,00,000 | $2,32,000 | $1,44,000 | $2,40,000 |
| Add: Desired ending inventory ($50000 + 10% of following months Cost of goods sold) | $73,200 | $64,400 | $74,000 | |
| Less: Opening Inventory | $73,200 | $64,400 | ||
| Inventory Purchases | $2,23,200 | $1,53,600 | ||
Accounts payable on the June 30 = June Inventory Purchases * 74% = $153600 *74% = $113,664
Hence option "C" is correct.
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