Sentra Sporting Company sells tennis rackets and other sporting equipment. The purchasing department manager prepared the inventory purchases budget. Sentra's policy is to maintain an ending inventory balance equal to 15% of the following month's cost of goods sold. January's budgeted cost of goods sold is $70,000. What is the amount of ending inventory that the company will report on its pro forma balance sheet?

Question

Sentra Sporting Company sells tennis rackets and other sporting equipment. The purchasing department manager prepared the inventory purchases budget. Sentra's policy is to maintain an ending inventory balance equal to 15% of the following month's cost of goods sold. January's budgeted cost of goods sold is $70,000.  What is the amount of ending inventory that the company will report on its pro forma balance sheet?

Quizplus · Accepted Answer

Budgeted ending inventory on December 31 = Budgeted cost of goods sold in January × 15%
Budgeted ending inventory on December 31 = $70,000 × 15% = $10,500

Sentra Sporting Company Sells Tennis Rackets and Other Sporting Equipment