The Jack Company is preparing its cash budget for the month of June.The following information is available concerning its inventories: What are the estimated cash disbursements for inventories in June?

Question

Quizplus · Accepted Answer

The estimated cash disbursements for June inventory are calculated by adding the estimated purchases for June to the May 31 inventory balance and subtracting the June 30 inventory balance. 
June Purchases = (June Sales x % of Sales on Credit) + June Inventory Increase - May Inventory Balance
= ($500,000 x 70%) + ($750,000 - $350,000) - $450,000
= $320,000

Estimated cash disbursements for inventories in June = June Purchases + May Inventory Balance - June Inventory Balance
= $320,000 + $35,250 - $20,000
= $335,250

Therefore, the correct answer is C.

The Jack Company Is Preparing Its Cash Budget for the Month