Teleco Corp. is preparing its budget for the first quarter of 2018. The following data is provided: $\begin{array}{|l|c|c|}
\hline \text { Inventory, Purchases, and COGS Budget } & \text { Jan } & \text { Feb } & \text { March }\
\hline \text { Cost of goods sold (a) } & \$ 30,000 & \$ 29,000&\$22,500 \
\hline \text { Desired ending inventory (b) } & 12,900 & 12,250&? \
\hline \text { Total inventory required } & 42,900 & 41,250 \
\hline \text { Less: Beginning inventory } & (15,000) & (12,900) \
\hline \text { Budgeted Purchases } & \$ 27,900 & \$ 28,350 \
\hline \text { (a) } \mathrm{COGS}=75 \% \text { of sales } & & \
\hline \text { (b) } \$ 10,000+10 \% \text { of COGS for next month } & & \
\hline
\end{array}$
April's cost of goods sold is $34,000. The amount of Merchandise Inventory to be shown on the budgeted balance sheet at March 31 would be ________.

Question

Teleco Corp. is preparing its budget for the first quarter of 2018. The following data is provided: $\begin{array}{|l|c|c|}
\hline \text { Inventory, Purchases, and COGS Budget } & \text { Jan } & \text { Feb } & \text { March }\
\hline \text { Cost of goods sold (a) } & \$ 30,000 & \$ 29,000&\$22,500 \
\hline \text { Desired ending inventory (b) } & 12,900 & 12,250&? \
\hline \text { Total inventory required } & 42,900 & 41,250 \
\hline \text { Less: Beginning inventory } & (15,000) & (12,900) \
\hline \text { Budgeted Purchases } & \$ 27,900 & \$ 28,350 \
\hline \text { (a) } \mathrm{COGS}=75 \% \text { of sales } & & \
\hline \text { (b) } \$ 10,000+10 \% \text { of COGS for next month } & & \
\hline
\end{array}$
 April's cost of goods sold is $34,000. The amount of Merchandise Inventory to be shown on the budgeted balance sheet at March 31 would be ________.

Quizplus · Accepted Answer

The formula to calculate the merchandise inventory balance is:

Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory

We are given the Cost of Goods Sold for April as $34,000, but we need to find Ending Inventory as of March 31. Since we are not given the Purchases figure, we can use the following assumptions to calculate the Ending Inventory:

- Teleco Corp. plans to have 20% of the cost of goods sold as ending inventory.
- Purchases will be equal to cost of goods sold plus ending inventory.

Using these assumptions, we can calculate the Ending Inventory as follows:

Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
Ending Inventory = 0 + (34000 * 0.2) + (34000 * 1.2) - 34000
Ending Inventory = $13,400

So the correct answer is option D.

Teleco Corp April's Cost of Goods Sold Is $34,000