Answer:
Ahmed Company
a. Computation of the budgeted merchandise purchases:
May June July August
Cash payments $1,400,000 1,550,000 1,400,000 1,500,000
Ending balance 150,000 130,000 300,000 120,000
Total $1,550,000 $1,680,000 $1,700,000 $1,620,000
less:
Beginning balance 150,000 130,000 300,000
Purchases $1,550,000 $1,530,000 $1,570,000 $1,320,000
b. Computation of the budgeted cost of goods sold:
May June July August
Beginning Inventory 260,000 500,000 300,000
Purchases 1,550,000 1,530,000 1,570,000 1,320,000
Goods available for sale 1,550,000 1,790,000 2,070,000 1,620,000
Ending Inventory 260,000 500,000 300,000 330,000
Cost of goods sold $1,290,000 $1,290,000 $1,770,000 $1,290,000
Explanation:
a) Data and Calculations:
Accounts Payable Merchandise Inventory
31-May 150,000 260,000
30-Jun 130,000 500,000
31-Jul 300,000 300,000
31-Aug 120,000 330,000
b) Ahmed Company's purchases of merchandise can be obtained by reviewing the Accounts Payable beginning and ending balances and the cash payments made during the months. Alternatively, monthly Accounts Payable can be prepared and the differences in the debit and credit side will be the purchases as the missing figure.
c) Once the purchases of merchandise have been computed, to compute the cost of goods sold becomes easier. The cost of goods sold for Ahmed Company is the difference between the cost of goods available for sale and the ending inventories of merchandise.
