Question

Zachary Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Zachary’s policy is to maintain an ending inventory balance equal to 20 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $83,000.

Required

1. Complete the inventory purchases budget by filling in the missing amounts.

2. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement.

3. Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter.

4. 	Inventory Purchases Budget January February March Budgeted cost of goods sold $54,000 $58,000 $64,000 Plus: Desired ending inventory 11,600 Inventory needed 65,600 Less: Beginning inventory 10,800 Required purchases (on account) $54,800

   Complete the inventory purchases budget by filling in the missing amounts.

   Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement.Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter.

   	b. Cost of goods sold c. Ending inventory

Answer 1

A
Inventory Purchases Budget
	January	February	March
Budgeted cost of goods sold	54000	58000	64000
Plus: Desired ending inventory	11600	12800	16600
Inventory needed	65600	70800	80600
Less: Beginning inventory	10800	11600	12800
Required purchases (on account)	54800	59200	67800
B
Cost of goods sold	176000	=54000+58000+64000
C
Ending inventory	16600	=83000*20%
Workings:
	January	February	March
Plus: Desired ending inventory	=58000*20%	=64000*20%	=83000*20%