Question

Munoz, Inc. sells fireworks. The company's marketing director developed the following cost of goods sold budget for April, May, June, and July. April May June July Budgeted cost of goods sold $79,000 $89,000 $99,000 $105,000 Munoz had a beginning inventory balance of $4,400 on April 1 and a beginning balance in accounts payable of $14,900. The company desires to maintain an ending inventory balance equal to 20 percent of the next period's cost of goods sold. Munoz makes all purchases on account. The company pays 65 percent of accounts payable in the month of purchase and the remaining 35 percent in the month following purchase. Required a. Prepare an inventory purchases budget for April, May, and June. b. Determine the amount of ending inventory Munoz will report on the end-of-quarter pro forma balance sheet. c. Prepare a schedule of cash payments for inventory for April, May, and June. d. Determine the balance in accounts payable Munoz will report on the end-of-quarter pro forma balance sheet. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Prepare an inventory purchases budget for April, May, and June. Inventory Purchases Budget Budgeted cost of goods sold April $ 79,000 $ May June 89,000 $ 99,000 Inventory needed Required purchases (on account) Required A Required B >

Answer 1

1   Inventory Purchase Budget           April May June July
                      
Budgeted Cost of goods sold 79000   89000   99000   185000
Closing Inventory needed 17800 19800 37000  
(20% of next periods COGS)                      
Opening inventory    4400 17800 19800 37000
Puchases   92400 91000 116200  
(COGS - Opening inventory + Closing Inventory)                      
                      
2. Closing Inventory at quarter end (June) = 185000 * 20%= $37000                      
                      
3. Schedule of cash payments           April May   June  
Payment of current A/c Payable       60060   59150   75530  
(65 % of current period purchase)                      
Payment of previous A/c Payable   14900 32340 31850  
(35% of previous period puchase)                      
Total Budeted payments of inv. 74960 91490 107380  
                      
4. Account payable balance at quarter end ( june) = 35 % of june purchase would be balance remaining = 35% * 116200 = $40670