Question

The following information pertains to the January operating budget for Casey Corporation.

∙ Budgeted sales for January $200,000 and February $100,000.
∙ Collections for sales are 60% in the month of sale and 40% the next month.
∙ Gross margin is 30% of sales.
∙ Administrative costs are $10,000 each month.
∙ Beginning accounts receivable is $20,000.
∙ Beginning inventory is $14,000.
∙ Beginning accounts payable is $65,000. (All from inventory purchases.)
∙ Purchases are paid in full the following month.
∙ Desired ending inventory is 20% of next month's cost of goods sold (COGS).


For January, budgeted cash payments for purchases are ________.

A.$50,000
B $100,000
C. $65,000
D. 70,000

Answer 1

As purchases are paid in full the following month of purchase, budgeted cash payments for purchases for January are beginning accounts payable which is $65,000.

The answer is Option A.