Question

Metro, Inc. sells backpacks. The Company's accountant is preparing the purchases budget for the first quarter operations. Metro maintains
ending inventory at 10% of the following month's expected cost of goods sold. Expected cost of goods sold for Aprill is $74,000. All
purchases are made on account with 20% of accounts paid in the month of purchase and the remaining 80% paid in the month following the
month of purchase.
K
Sales
January February
March
$42,000 $54,000 $62,000
Budgeted cost of goods sold
Plus: Desired ending inventory
Inventory needed
5,400
47,400
(8,400)
Less: Beginning inventory
Required purchases
$39,000
Based on this information the amount of accounts payable appearing on the March 31 pro forma balance sheet is

Answer 1

The amount of accounts payable appearing on the March 31 pro forma balance sheet is $31,200.

Account payable

Using this formula

Account payable=Required purchases× Remaining percentage

Where:

Required purchases=$39,000

Remaining percentage=80%

Let plug in the formula

Account payable=$39,000×80%

Account payable=$31,200

Therefore the amount of accounts payable appearing on the March 31 pro forma balance sheet is $31,200.

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