Question

Vernon Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Vernon's policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. April's budgeted cost of goods sold is $79,000. Required a. Complete the inventory purchases budget by filling in the missing amounts. b. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement c. Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter. Complete this question by entering your answers in the tabs below. Reg A Req B and C Complete the inventory purchases budget by filling in the missing amounts. Inventory Purchases Budget January February March Budgeted cost of goods sold $ 56,000 $60,000 $66.000 6,000 Inventory needed 62,000 5,600 Required purchases (on account) $ 56.400

Answer 1

A.

Inventory Purchases Budget
	January	February	March
Budgeted cost of goods sold	56,000	60,000	66,000
Ending inventory of finished goods	6,000	660,000 x 10% = 6,600	79,000 x 10% = 7,900
Inventory needed	62,000	66,600	73,900
Beginning inventory of finished goods	-5,600	-6,000	-6,600
Required purchases (on account)	56,400	60,600	67,300

B.

Cost of goods sold for quarter 1 = Cost of goods sold for January + Cost of goods sold for February + Cost of goods sold for March

= 56,000+60,000+66,000

= $182,000

C.

Ending inventory = $7,900

b.	Cost of goods sold	$182,000
c.	Ending inventory	$7,900

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