Question

It is November 1 of Year 1. Sales for Robert Company for November and December of Year 1 and January of Year 2 are forecasted to be as follows:

November, 400,000; December 600,000; January, 200,000

If you could explain this step by step it would help me understand how to do these greatly! thank you :)

On average, cost of goods sold is 70% of sales. During this period, Robert Company expects inventory levels to remain constant. This means that inventory purchases are expected to equal the amount of cost of goods sold.

100% of purchases are on credit. Of the credit purchases, 5% are paid during the month of the purchase, 65% in the month following the purchase, and 30% in the second month following the purchase. Sales for September and October of Year 1 were 100,000 and 150,000, respectively.

What is the amount of payments made in cash for November purchases?

Answer 1

		$			$
		Nov			Dec
Sales		100000			150000
cost of goods sold		70000			105000
Purchases=COGS		70000			105000
PAYMENT
FIRST MONTH-NOV AMOUNT PAID 5% OF 7000		3500
SECOND MONTH DEC AMT PAID 65%OF 70000		45500	DEC AMT	5% OF 105000	5250
THIRD MONTH JAN AMT PAID 30% OF 70000		21000	JAN	65% OF 105000	68250
			FEB	30% OF 105000	31500
TOTAL CASH PAID IN NOVEMBER=	$3500