Question

Cave​ Hardware's forecasted sales for​ April; May;​ June; and July are $ 200,000​; $ 210,000​; $ 150,000​; and $ 240,000​; respectively. Sales are 70​% cash and 30​% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 80​% of sales and ending inventory is maintained at $ 75,000 plus 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:

The balance of account payable for month of June would be $94,128

Explanation:

Here for taking out the amount account payable for month of June , we will need to have Purchases for the month of June and as it is told that 74% of the inventory purchased would be paid in the following month, it means that the inventory that was purchased in May , 74% of it would be paid in June , so therefore the 74% of purchases would be the account payable for month of June.

First we would have to take out purchases and for that we will use equation of -

Cost of goods sold + ending inventory - opening inventory (for June)

COST OF GOODS SOLD =

$150,000 X 80%

= $120,000

ENDING INVENTORY =

$75,000 + 10% OF COST OF GOODS SOLD OF JULY

= $75,000 + 10% X [ 80% X $240,000 ]

= $75,000 + 10% X 192,000

= $75,000 + $19,200

= $94,200

OPENING INVENTORY =

$75,000 + $120,000 X 10%

= $75,000 + $12,000

= $87,000

Now putting all these values in equations top take out purchases-

=$120,000 + $94,200 - $87,000

= $127,200

PURCHASES = $127,200

ACCOUNT PAYABLE = PURCHASES X 74%

= $127,200 X 74%

= $94,128