Sound Check, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory in each month to equal 25% of the next month’s budgeted cost of goods sold. All purchases are on credit, and 20% of the purchases in a month is paid for in the same month. Another 50% is paid for during the first month after purchase, and the remaining 30% is paid for in the second month after purchase. The following sales budgets are set: July, $300,000; August, $240,000; September, $270,000; October, $240,000; and November, $210,000. Compute the following: (1) budgeted merchandise purchases for July, August, September, and October; (2) budgeted payments on accounts payable for September and October; and (3) budgeted ending balances of accounts payable for September and October. (Hint: For part 1, refer to Exhibits 20.7 and 20.8 for guidance, but note that budgeted sales are in dollars for this assignment.)
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