The following budgeted information about Reeves Co. is available for September 2

Question

The following budgeted information about Reeves Co. is available for September 2010:
Sales for September 2,700,000
Gross Profit of Sales 40%
Decrease in Merchandise inventory during September 43,750
Wages Expense for September 325,500
Increases in Wages payable for September 42,000
Other cash expenses for September 245,000
Decrease in Accounts Payable during September 35,000

Reeves Co. only uses its Accounts Payable for inventory purchases.

a. How much does Reeves Co. expect to pay for inventory in September 2010?
$

b. What are total budgeted cash disbursements for September 2010?
$

Explanation / Answer

a. Reeves Co. expected to pay for inventory in September 2010: Sales $2,700,000 Less: Gross profit 40% of sale ($1,080,000) Cost of goods sold $1,620,000 Less: Decrease in merchandise inventory ($43,750) Required inventory purchases $1,576,250 Add: Decrease in accounts payable $35,000 Expected to pay for inventory in september $1,611,250 Sales $2,700,000 Less: Gross profit 40% of sale ($1,080,000) Cost of goods sold $1,620,000 Less: Decrease in merchandise inventory ($43,750) Required inventory purchases $1,576,250 Add: Decrease in accounts payable $35,000 Expected to pay for inventory in september $1,611,250
b. Total budgeted cash disbursements for september 2010: Budgeted cash disbursements: Wages expenses for september $325,500 Less: Increase in wages payable ($42,000) $283,500 Add: Other cash expense for september $245,000 Budgeted cash disbursements $528,500 Add: Expected to pay for inventory in september $1,611,250 Total required cash disbursements: $2,139,750 Thank you.... Sales $2,700,000 Less: Gross profit 40% of sale ($1,080,000) Cost of goods sold $1,620,000 Less: Decrease in merchandise inventory ($43,750) Required inventory purchases $1,576,250 Add: Decrease in accounts payable $35,000 Expected to pay for inventory in september $1,611,250

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