Question

Rooney, Inc. sells fireworks. The company's marketing director developed the following cost of goods sold budget for April, May, June, and July. April $71,000 May $81,000 June $91,000 July $97,000 Budgeted cost of goods sold Rooney had a beginning inventory balance of $3,900 on April 1 and a beginning balance in accounts payable of $14,000. The company desires to maintain an ending inventory balance equal to 15 percent of the next period's cost of goods sold. Rooney makes all purchases on account. The company pays 65 percent of accounts payable in the month of purchase and the remaining 35 percent in the month following purchase. Required a. Prepare an inventory purchases budget for April, May, and June. b. Determine the amount of ending inventory Rooney will report on the end-of-quarter pro forma balance sheet. c. Prepare a schedule of cash payments for inventory for April, May, and June. d. Determine the balance in accounts payable Rooney will report on the end-of-quarter pro forma balance sheet. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Prepare an inventory purchases budget for April, May, and June.

Answer 1

a) Rooney, Inc. Purchases Budget For Three Months April, May & June April May June Quarter July Cost of Goods Sold $71,000 $81,000 $91,000 $243,000 $97,000 Add: Ending Inventory $12,150 $13,650 $14,550 $14,550 [Ref: NOTE] Total Goods Needed $83,150 $94,650 $105,550 $257,550 Less: Beginning Inventory $3,900 $12,150 $13,650 $3,900 = Respective previous quarter's ending invetory calculated Inventory Purchases $79,250 $82,500 $91,900 $253,650 NOTE: Ending Inventory for April = $81000 x 15% = $12150; May = $91000 x 15% = $13650; June = $97000 x 15% = $14550. b) Amount of ending inventory Rooney will report on the end-of-quarter pro forma balance sheet = $14,550 Rooney, Inc. Schedule of Cash Payments For Three Months April, May & June April May Payment of current accounts payable $51,513 $53,625 Payment of previous accounts payable $14,000 $27,737 Total budgeted payments for inventory $65,513 $81,362 June $59,735 $28,875 $88,610 Quarter $164,873 ($79250 x 65%; $82500 x 65%; $91900 x 65%] $70,612 [Given; $79250 x 35%; $82500 x 35%] $235,485 d) Amount of accounts payable Rooney will report on the end-of-quarter pro forma balance sheet = $32,165 ($91900 x 35%]