Question

Rundle Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Rundle’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 $83,000.

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 $52,000 $56,000 $62,000 Plus: Desired ending inventory 8,400 Inventory needed 60,400 Less: Beginning inventory 7,800 Required purchases (on account) $52,600

Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter.

	b. Cost of goods sold c. Ending inventory

Answer 1

Inventory Purchases Budget
	January	February	March	April	First Quarter
Budgeted cost of goods sold	$           52,000	$         56,000	$             62,000	$          83,000	$        170,000
Plus: Desired ending inventory (Next month’s cost of goods sold * 15%)	$             8,400	$           9,300	$             12,450		$           12,450
Inventory needed	$           60,400	$         65,300	$             74,450		$        182,450
Less: Beginning inventory	$             7,800	$           8,400	$               9,300		$             7,800
Required purchases (on account)	$           52,600	$         56,900	$             65,150		$        174,650

Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter.
Cost of goods sold			$           170,000
Ending inventory			$             12,450