Question

Baird, Inc. sells fireworks. The company’s marketing director developed the following cost of goods sold budget for April, May, June, and July.

April May June July Budgeted cost of goods sold $69,000 $79,000 $89,000 $95,000

Baird had a beginning inventory balance of $4,400 on April 1 and a beginning balance in accounts payable of $15,200. The company desires to maintain an ending inventory balance equal to 20 percent of the next period’s cost of goods sold. Baird makes all purchases on account. The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the month following purchase.  

Required

Prepare an inventory purchases budget for April, May, and June.

Determine the amount of ending inventory Baird will report on the end-of-quarter pro forma balance sheet.

Prepare a schedule of cash payments for inventory for April, May, and June.

Determine the balance in accounts payable Baird will report on the end-of-quarter pro forma balance sheet.

Prepare an inventory purchases budget for April, May, and June.

	Inventory Purchases Budget April May June Budgeted cost of goods sold $69,000 $79,000 $89,000 Plus: Desired ending inventory Inventory needed 69,000 79,000 89,000 Required purchases (on account) $69,000 $79,000 $89,000

Determine the amount of ending inventory Baird will report on the end-of-quarter pro forma balance sheet.

	Ending inventory

Prepare a schedule of cash payments for inventory for April, May, and June. (Round your final answers to the nearest whole dollar.)

	Schedule of Cash Payments April May June Payment of current accounts payable Payment of previous accounts payable Total budgeted payments for inventory $0 $0 $0

Determine the balance in accounts payable Baird will report on the end-of-quarter pro forma balance sheet.

	Accounts payable

Answer 1

1)	Inventory Purchase Budget	April	May	June
	Budgeted Cost of goods sold	$ 69,000	$ 79,000	$     89,000
	Plus:Desired ending inventory	$ 15,800	$ 17,800	$     19,000
	Inventory Needed	$ 84,800	$ 96,800	$ 1,08,000
	Beginning Inventory	$    4,400	$ 15,800	$     17,800
	Required Purchases (on account)	$ 80,400	$ 81,000	$     90,200
Working:
	Months	April	May	June
	Next Months cost of goods sold	$ 79,000	$ 89,000	$     95,000
	Ending Inventory - 20%	$ 15,800	$ 17,800	$     19,000
2)
	Amount of ending Inventory on the end of quarter			$     19,000
3)	Schdule of Cash Payment for Inventory
		April	May	June
	Payments of Current Accounts Payable	$ 56,280	$ 56,700	$     63,140
	Payments of previous Accounts Payable	$ 15,200	$ 24,120	$     24,300
	Total Budgeted payment for Inventory	$ 71,480	$ 80,820	$     87,440
Working:
a.	Months	April	May	June
	Required Purchases (on account)	$ 80,400	$ 81,000	$     90,200
	Payments of Current Accounts Payable-70%	$ 56,280	$ 56,700	$     63,140
b.	Months	April	May	June
	Previous month Purchases (On account)		$ 80,400	$     81,000
	Payments of previous Accounts Payable-30%	$ 15,200	$ 24,120	$     24,300
4)	Accounts Payable at the end of quarter		$ 27,060
Working:
	30% of June 's Purchases (on account)	=	$ 90,200	x	30%	=	$ 27,060