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Exercise 20-28A Merchandising: Computing budgeted purchases and cost of goods sold LO P4 Ahmed Company purchases...

Exercise 20-28A Merchandising: Computing budgeted purchases and cost of goods sold LO P4

Ahmed Company purchases all merchandise on credit. It recently budgeted the month-end accounts payable balances and merchandise inventory balances below. Cash payments on accounts payable during each month are expected to be May, $1,100,000; June, $1,450,000; July, $1,350,000; and August, $1,200,000

Accounts
Payable
Merchandise Inventory
May 31 $ 190,000 $ 270,000
June 30 170,000 200,000
July 31 400,000 400,000
August 31 110,000 320,000

Solutions

Expert Solution

Solution 1:

Budgeted Amounts of Merchandise Purchases
Particulars June July August
Ending Accounts Payable $        170,000 $        400,000 $        110,000
Payment on Account $     1,450,000 $     1,350,000 $     1,200,000
Subtotal $     1,620,000 $     1,750,000 $     1,310,000
Beginning Accounts payable $        190,000 $        170,000 $        400,000
Purchases $     1,430,000 $     1,580,000 $        910,000
Solution 2:
Budgeted Amounts of Cost of Goods sold
Particulars June July August
Beginning inventory $        270,000 $        200,000 $        400,000
Purchases $     1,430,000 $     1,580,000 $        910,000
Cost of goods available for sale $     1,700,000 $     1,780,000 $     1,310,000
Ending inventory $        200,000 $        400,000 $        320,000
Cost of goods sold $     1,500,000 $     1,380,000 $        990,000

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