Sandy Corporation has a sales budget for next month of $50,000.Cost of goods sold is expected to be 60 percent of sales.All goods are purchased in the month used and paid for in the month following their purchase.The beginning inventory of merchandise is $1,500 and an ending inventory of $2,000 is desired.Beginning accounts payable is $13,000. What should be the ending accounts payable for Sandy Corporation?

Question

Quizplus · Accepted Answer

First, we calculate the total cost of goods sold, which is 60% of the sales budget:
$50,000 x 0.60 = $30,000

To determine the total amount of merchandise purchases needed, we should add the beginning inventory and subtract the desired ending inventory:
$1,500 + $30,000 – $2,000 = $29,500

Since all goods are purchased in the month used and paid for in the month following their purchase, the total amount of payments for merchandise purchases equals the total cost of goods sold plus the change in accounts payable.

Therefore, we can set up the following equation:

Accounts payable at the end = Accounts payable at the beginning + Merchandise purchases – Merchandise payments

To solve for the ending accounts payable, we need to plug in the given numbers:

Accounts payable at the end = $13,000 + $29,500 – $30,000 
Accounts payable at the end = $12,500

Therefore, the correct answer is D, $30,500.

Sandy Corporation Has a Sales Budget for Next Month of $50,000.Cost