Question

Payne Company provided the following information relevant to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year 2 (Actual) (Budgeted) (Budgeted) (Budgeted) Cost of goods sold $ 80,000 $ 140,000 $ 180,000 $ 120,000 Desired ending inventory levels are 25% of the following month's projected cost of goods sold. The company purchases all inventory on account. January Year 2 budgeted purchases are $150,000. The normal schedule for inventory payments is 60% payment in month of purchase and 40% payment in month following purchase. Budgeted cash payments for inventory in February Year 2 would be:

Multiple Choice

$132,600.

$152,600.

$99,000.

$159,000

Answer 1

Calculate inventory purchase

	February
Cost of goods sold	180000
Add: Desired ending inventory	30000
Less: Beginning inventory	-45000
Purchase	165000

Cash payment for february = (165000*60%+150000*40%) = 159000

So answer is d) $159000