Question

Jordan Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Jordan’s policy is to maintain an ending inventory balance equal to 15 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $80,000.

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.   

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

   	Inventory Purchases Budget January February March Budgeted cost of goods sold $57,000 $61,000 $67,000 Plus: Desired ending inventory 9,150 Inventory needed 66,150 Less: Beginning inventory 8,550 Required purchases (on account) $57,600

Answer 1

Solution:

Inventory Purchases Budget
	January	February	March
Budgeted cost of goods sold	$57,000	$61,000	$67,000
Plus: Desired ending inventory	$9,150	$10,050	$12,000
Inventory needed	$66,150	$71,050	$79,000
Less: Beginning inventory	$8,550	$9,150	$10,050
Required purchases (on account)	$57,600	$61,900	$68,950

Cost of goods sold for first quarter = $57000 + $61000 + $67000 = $185,000

Ending inventory the company will report on its pro forma balance sheet at the end of the first quarter = $12,000