Cave Hardware\'s forecasted sales for April, May. June, and July are $230,000; $

Question

Cave Hardware's forecasted sales for April, May. June, and July are $230,000; $250,000, $170,000, and $230,000, respectively. Sales are 70% cash and 30% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 80% of sales and ending inventory is maintained at $50,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 28% in the month of purchase and 72% in the following month. What is the balance of accounts payable on the June 30 budgeted balance sheet at Cave Hardware? O A. $122,400 OB. $88.128 OC. $101,376 OD, $140,800

Explanation / Answer

C. $ 101, 376

Working:

a. Calculation of cost of goods sold: April May June July Sales a           2,30,000 2,50,000 1,70,000 2,30,000 Cost of goods sold b=a*80%           1,84,000 2,00,000 1,36,000 1,84,000 b. Calculation of Ending Inventory: April May June Next Month cost of goods sold a           2,00,000 1,36,000 1,84,000 Ending Inventory b=$ 50,000+a*10%               70,000      63,600      68,400 c. Calculation of Purchase: June Cost of goods sold           1,36,000 Ending Inventory               68,400 Cost of goods available for sale           2,04,400 Less:Beginning Inventory               63,600 Purchase           1,40,800 d. 72% of Inventory purchased are paid in the next month.So,Accounts Payable will be 72% of purchase each month. Accounts Payable on June 30 = Purchases of June x 72% =           1,40,800 x 72% = $       1,01,376

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