Payne Company provided the following information relevant to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: $\begin{array}{llcc}
&\text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 &\text { Mar. Year }\
&\text { (Actual) }&\text {(Budgeted) }&\text {(Budgeted) }&\text {(Budgeted) }\
\text { Cost of goods}& \$80,000 &\$140,000 &\$180,000 &\$ 120,000 \
\text { sold }
\end{array}$
Desired ending inventory levels are 25% of the following month's projected cost of goods sold. The company purchases all inventory on account. January Year 2 budgeted purchases are $150,000. The normal schedule for inventory payments is 60% payment in month of purchase and 40% payment in month following purchase.
Budgeted cash payments for inventory in February Year 2 would be:

Question

Payne Company provided the following information relevant to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: $\begin{array}{llcc}
&\text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 &\text { Mar. Year }\
&\text { (Actual) }&\text {(Budgeted) }&\text {(Budgeted) }&\text {(Budgeted) }\
\text { Cost of goods}& \$80,000 &\$140,000 &\$180,000 &\$ 120,000 \
\text { sold }
\end{array}$
 Desired ending inventory levels are 25% of the following month's projected cost of goods sold. The company purchases all inventory on account. January Year 2 budgeted purchases are $150,000. The normal schedule for inventory payments is 60% payment in month of purchase and 40% payment in month following purchase.
Budgeted cash payments for inventory in February Year 2 would be:

Quizplus · Accepted Answer

In February, 60% of February's purchases ($180,000) are paid, which is $108,000. Additionally, 40% of January's purchases ($150,000) are paid, which is $60,000. Total cash payments in February = $108,000 + $60,000 = $168,000.

Payne Company Provided the Following Information Relevant to Its Inventory