Estimate purchases in 1996. (Hint: Cost of goods equals purchases plus beginning inventory minus ending inventory.)
Use the percent of sales method to estimate funds needed in 1996 using the 1995 percentages.
The calculation of inventory purchases is:
= (Ending inventory - Beginning inventory) + Cost of goods sold
Total valuation of beginning inventory. This information appears on the balance sheet of the immediately preceding accounting period.
Total valuation of ending inventory. This information appears on the balance sheet of the accounting period for which purchases are being measured.
Cost of goods sold. This information appears on the income statement of the accounting period for which purchases are being measured.
Please find the attached solution:
Estimate purchases in 1996. (Hint: Cost of goods equals purchases plus beginning inventory minus ending inventory.)...
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