Nobula Corp. is preparing their budget for the 2^nd quarter and provides the following data: $$\begin{array} { | l | r | r | r | } \hline & { \text { Apr } } & { \text { May } } & \text { Jun } \ \hline \text { Budgeted purchases } & \$ 20,000 & \$ 24,000 & \$ 18,000 \ \hline \text { Budgeted Cash Payments for Inventory } & & & \ \text { Purchases } & { \text { Apr } } &{ \text { May } } & \text { Jun } \ \hline 60 \% \text { of previous month purchases } & \$ 6,000 & \$ 12,000 & \$ 14,400 \ \hline 40 \% \text { of current month purchases } & 8,000 & 9,600 & 7,200 \ \hline \text { Total cash payments } & \$ 14,000 & \$ 21,600 & \$ 21,600 \ \hline \end{array}$$ Assume that accounts payable pertains only to suppliers of inventory. Based on the above data, the amount of Accounts Payable that should be shown in the budgeted balance sheet as on June 30^th is:

Question

Quizplus · Accepted Answer

To calculate the accounts payable for June 30th, we need to calculate the total purchases for June first.

Total purchases for June = $18,000

60% of previous month purchases ($24,000 for May) = $14,400 
40% of current month purchases = $7,200

Budgeted Cash Payments for Inventory for June = $21,600

Now, we can calculate the accounts payable for June 30th using the following formula:

Accounts Payable = Previous month's accounts payable + Purchases - Cash payments

Since we know that there were no accounts payable at the end of May, the formula simplifies to:

Accounts Payable = Total Purchases - Cash Payments

Accounts Payable for June 30th = $18,000 - $21,600 = -$3,600

This negative amount indicates that the company will have a net cash outflow for inventory purchases in June, meaning they will have paid suppliers more than they should have based on their budgeted purchases.

Since we can't have negative accounts payable, we need to adjust our calculation. The budgeted cash payments for June ($21,600) includes 40% of June's purchases as well as 60% of May's purchases. In other words, the company is planning to pay more cash than necessary for inventory purchases in June.

To find the amount of actual cash payments due for June (based solely on June's purchases), we can use the following formula:

Actual cash payments for June = 40% of June's purchases = 0.4 x $18,000 = $7,200

Now, we can recalculate the accounts payable:

Accounts Payable for June 30th = $18,000 - $7,200 = $10,800

Therefore, the correct answer is C) $10,800.

Nobula Corp Assume That Accounts Payable Pertains Only to Suppliers of Inventory