In: Accounting
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 | ||||
Solution 1: |
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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 |