Question

system Announcements CALCULATOR PRINTER VERSION BAC Problem 9-5A (Part Level Submission) (Video) The budget committee of Suppar Company collects the following data for its San Miguel Store in preparing budgeted income statements for May and June 2020. 1. Sales for May are expected to be $1,200,000. Sales in June and July are expected to be 5% higher than the preceding month. 2. Cost of goods sold is expected to be 75% of sales. 3. Company policy is to maintain ending merchandise inventory at 10% of the following month's cost of goods sold. 4. Operating expenses are estimated to be as follows: Sales salaries Advertising Delivery expense Sales commissions Rent expense Depreciation Utilities Insurance $30,000 6% 2% 5% per month of monthly sales of monthly sales of monthly sales per month per month per month per month $5,390 per $910 $710 $560 5. Interest expense is $2,000 per month. Income taxes are estimated to be 30% of income before income taxes. Your answer is partially correct. Try again. Prepare the merchandise purchases budget for each month in columnar form SUPPAR COMPANY San Miguel Store Merchandise Purchase Budget For the Months of May and lune, 2020 : May

Answer 1

Particulars	May ($)	June ($)
Budgeted cost of goods sold                                             + ADD: Desired ending merchandise inventory Total                       - LESS: Beginning merchandise inventory Required merchandise purchases:	900000 (1200000*75%) 94500 (Note-1) 994500 (90000) (Note-3) 904500	945000 (1200000+5%*75%) 99225 (Note-2) 1044225 (94500) (Notw-4) 949725

Note 1:As per the question ending inventory must be the 10% subsequent COGS hence
COGS FOR JUNE IS 945000*10%=94500

Note 2 : As per the question ending inventory must be 10% of the preceding month
COGS FOR JULY IS 1260000+5%*75%= 992250
Closing inventory will be – 992250*10%= 99225

Note 3: Since question hasn’t gave any information about the ending inventory for the April I have assumed sales for the month of April will considered as a 1200000 itself hence closing stock of April will be 1200000*75%=900000

900000*10%= 90000

Note 4 : Closing inventory for the May will be the beginning inventory