Answer:
Part A. The amount of purchases budgeted for July is calculated below:
Amount of purchases = Cost of goods sold + Closing inventory - Opening inventory
Amount of purchases = ($320,000 x 1.09) + $34,000 - $33,000
Amount of purchases = $348,800 + $34,000 — $33,000
Amount of purchases = $349,800
Therefore, the amount of purchases budgeted for July is $349,800.
Part B. The amount of cash payments budgeted for inventory purchases in July is calculated below:
Amount of cash paid in July = Opening accounts receivable + 75% of purchases in July
Amount of cash paid in July = $37,000 + ($349,800 × 0.75)
Amount of cash paid in July = $37,000 + $262,350
Amount of cash paid in July = $299,350
Therefore, the amount of cash paid in July is $299,350.
