Thomas Company has a sales budget for next month of $1,000,000. Cost of goods sold is expected to be 25 percent of sales. All goods are paid for in the month following purchase. The beginning inventory of merchandise is $50,000, and an ending inventory of $64,000 is desired. Beginning accounts payable is $160,000.
For Thomas Company, the ending accounts payable should be:

Question

Quizplus · Accepted Answer

Ending accounts payable should be equal to current period's purchases since the beginning balance carried over from the prior period is paid in the current period. Current purchases are $264,000 calculated as ending inventory of $64,000 plus cost of goods sold of $250,000 = $314,000, less beginning inventory of $50,000 = $264,000.

Thomas Company Has a Sales Budget for Next Month of $1,000,000