Question

Hardy Company's cost of goods sold is consistently 70% of sales. The company plans ending merchandise inventory for each month equal to 30% of the next month's budgeted cost of goods sold. All merchandise is purchased on credit, and 40% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 25% is paid for during the second month after purchase. Expected sales are: August (actual). $415,000; September (actual). $390,000, October (estimated) $260,000; and November (estimated) $370,000 Use this information to determine October's expected cash payments for purchases. Calculate Monthly Purchases: August September October November Budgeted ending inventory Required available inventory Required purchases Calculate Payments Made for Inventory Purchases paid in September October Purchases August After October August purchase September purchases October purchases Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchases < Prey 3 of 4 !!! Next >

Answer 1

Solution:

Calculate monthly purchases:
Particulars	August	September	October	November
Budgeted ending inventory	$81,900.00	$54,600.00	$77,700.00
Cost of goods sold	$290,500.00	$273,000.00	$182,000.00	$259,000.00
Required availalble inventory	$372,400.00	$327,600.00	$259,700.00
Less: Beginning inventory	$87,150.00	$81,900.00	$54,600.00
Required purchases	$285,250.00	$245,700.00	$205,100.00
		Purchases Paid In
Particulars	Purchases	August	September	October	After October
August Purchases	$285,250.00	$114,100.00	$99,837.50	$71,312.50
September Purchases	$245,700.00		$98,280.00	$85,995.00	$61,425.00
October Purchases	$205,100.00			$82,040.00	$123,060.00
				$239,347.50

October expected cash payment for purchases = $239,347.50