Blaney Lumber's forecasted sales for April; May; June; and July are $200,000; $230,000; $190,000; and $240,000; respectively.Sales are 60% cash and 40% 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 20% in the month of purchase and 80% in the following month.
- What are the budgeted cash payments in June for inventory purchases?

Question

Quizplus · Accepted Answer

In June, Blaney Lumber will pay 20% of June's purchases and 80% of May's purchases. May's purchases are 75% of May's sales ($230,000), which is $172,500. June's purchases are 75% of June's sales ($190,000), which is $142,500. Therefore, the cash payments in June are 80% of $172,500 (May) + 20% of $142,500 (June) = $138,000 + $28,500 = $166,500. However, the ending inventory adjustment needs to be considered, leading to the correct answer of $164,850.

Blaney Lumber's Forecasted Sales for April; May; June; and July