Adams Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget.

Adams Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Adams's policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. April's budgeted cost of goods sold is $83,000.

Required

a. Complete the inventory purchases budget by filling in the missing amounts.

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

Expert Solution

Solution a:

Inventory Purchases Budget
Particulars	January	February	March
Budgeted cost of goods sold	$59,000.00	$63,000.00	$69,000.00
Plus: Desired Ending inventory	$6,300.00	$6,900.00	$8,300.00
Inventory needed	$65,300.00	$69,900.00	$77,300.00
Less: Beginning inventory	$5,900.00	$6,300.00	$6,900.00
Required purchases (On account)	$59,400.00	$63,600.00	$70,400.00

Solution b & c:

Cost of goods sold to be reported in first quarter = $59,000 + $63,000 + $69,000 = $191,000

Ending inventory to be reported at the end of first quarter = $8,300

ekkarill92 answered 2 years ago

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