Cave Hardware's forecasted sales for April; May; June; and July are $200,000; $230,000; $190,000; and $240,000; respectively. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 22% in the month of purchase and 78% in the following month. What is the balance of accounts payable on the June 30 budgeted balance sheet?

Question

Quizplus · Accepted Answer

To calculate the balance of accounts payable on the June 30 budgeted balance sheet, we need to determine the purchases made in May and June.
For May:
Sales = $230,000
Cash sales = 0.65 ($230,000) = $149,500
Credit sales = 0.35 ($230,000) = $80,500
Cost of goods sold = 0.75 ($230,000) = $172,500
Inventory purchases = $172,500 - $60,000 + 0.1 ($190,000) = $127,000
Accounts payable for May = 0.78 ($127,000) = $99,060

For June:
Sales = $190,000
Cash sales = 0.65 ($190,000) = $123,500
Credit sales = 0.35 ($190,000) = $66,500
Cost of goods sold = 0.75 ($190,000) = $142,500
Inventory purchases = $142,500 - $76,500 + 0.1 ($240,000) = $112,500
Accounts payable for June = 0.22 ($112,500) = $24,750

Therefore, the balance of accounts payable on the June 30 budgeted balance sheet is $99,060 + $24,750 = $123,810, which is closest to option D ($114,075).

Cave Hardware's Forecasted Sales for April; May; June; and July