Question

Cave Hardware's forecasted sales for April; May; June; and July are $ 170,000; $ 230,000; $ 190,000; and $ 260,000; respectively. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 85% of sales and ending inventory is maintained at $ 80,000 + 10% of the following month's cost of goods sold. All inventory purchases are paid 26% in the month of purchase and 74% in the following month. What is the balance of accounts payable on the June 30 budgeted balance sheet at Cave Hardware?

Answer 1

Answer:

accounts payable 128,500

Explanation:

To answer we must determine how much is the amount of purchases needed for the month of June.

It is not interesting the debt that is generated in previous months since they are paid in full, so in May the purchases of the month of May will already be canceled, so they will not impact the suppliers account.

June  

Purchases=  190,000 x 0.85 + (inventory cost of sales of the month) + 80,000 (inventory at the end of the month)  + 260,000 x 10% (inventory at the end of the month) = 276,500,

But according to the company's policy at the beginning of the month the inventory was equal to

80,000 + 190,000x10% (June sales) = 99,000

So the purchases necessary to meet the costs of sale and comply with the policy of the owner at closing is the same

267.500(inventory needed) - 99.000( initial existence) = 168.500

the record will be

Inventory      168,500

Cash                           43,810

accounts paylable    124,690