Question

Ahmed Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,200,000; June, $1,500,000; July, $1,400,000; and August, $1,400,000
Accounts
Payable Merchandise Inventory
May 31 $ 150,000 $ 260,000
June 30 130,000 500,000
July 31 300,000 300,000
August 31 120,000 330,000


(1) Compute the budgeted amounts of merchandise purchases.
Budgeted amounts: June July August
Ending accounts payable
Payments on account
Subtotal 0 0 0
Beginning accounts payable
Purchases $0 $0 $0
(2) Compute the budgeted amounts of cost of goods sold.
Budgeted amounts: June July August
Beginning inventory
Purchases
Cost of goods available for sale
Ending inventory (500,000) (300,000) (330,000)
Cost of goods sold $

Answer 1

Answer:

Budgeted amounts:                 June              July              August

1. Purchases                             $1,480,000   $1,570,000   $1,220,000

2. Cost of goods sold              $1,240,000   $1,770,000   $1,190,000

Explanation:

The computations are shown below:

1.

Budgeted amounts:                 June              July              August

Ending accounts payable         $130,000    $300,0000    $120,000

Payments on account              $1,500,000  $1,400,000     $1,400,000

Subtotal                                  $1,630,0000 $1,700,000      $1,520,000

Beginning accounts payable  ($150,000)     ($130,000)      $300,000)

Purchases                                $1,480,000   $1,570,000     $1,220,000      

2.

Budgeted amounts:                 June               July                   August

Beginning inventory                 $260,000      $500,000      $300,000

Purchases                                 $1,480,000   $1,570,000     $1,220,000      

Cost of goods available for sale  $1,740,000 $2,070,000  $1,520,000

Ending inventory                         (500,000)     (300,000)     (330,000)

Cost of goods sold                      $1,240,000   $1,770,000   $1,190,000