Question

Payne Company provided the following information relevant to its inventory sales and purchases for December 2013 and the first quarter of 2014. Desired ending inventory levels are 25% of the following month's projected cost of goods sold. The company purchases all inventory on account. January 2014 budgeted purchases are $150,000. The normal schedule for inventory payments is 60% payment in the month of purchase and 40% payment in month following purchase. Budgeted cash payments for inventory in February 2014 would be:

Answer 1

Answer:

$159,000

Explanation:

This question is incomplete we attach the attachment below:

The computation of the budgeted cash payments for inventory is shown below:

But for that first we have to determine the purchase amount which is shown below:

Purchase = Ending inventory + cost of goods sold - beginning inventory

where,

Ending inventory = $120,000 × 25% = $30,000

Cost of goods sold = $180,000

Beginning inventory = $180,000 × 25% = $45,000

So, the purchase amount is

= $30,000 + $180,000 - $45,000

= $165,000

Now the cash payment would be

= 60% of $165,000 + 40% of $150,000

= $99,000 + $60,000

= $159,000