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 are the budgeted cash payments in June to account for the inventory purchases at Cave Hardware?

Question

Quizplus · Accepted Answer

C)
Ending Inventory April $60,000 + (10% × 172,500)= $77,250
May 60,000 + (10% × 142,500)= 74,250
June 60,000 + (10% × 180,000)= 78,000
Cost of Goods Sold May $230,000 × 75% = 172,500
June 190,000 × 75% = 142,500
July 240,000 × 75% = 180,000
May June
Cost of Goods sold $172,500 142,500
+Ending Inventory 74,250 78,000
-Beginning Inventory 77,250 74,250
=Purchases 169,500 146,250
× 78% × 22%
Cash Payments 132,210 + 32,175 = $164,385

Cave Hardware's Forecasted Sales for April,May,June,and July Are $200,000,$230,000,$190,000,and $240,000,respectively