Tucker Lighting Co. sells lamps and other lighting fixtures. The purchasing depa

Question

Tucker Lighting Co. sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Tucker Lighting's policy is to maintain an ending inventory balance equal to 10% of the following month's cost of goods sold. April's budgeted cost of goods sold is $85,000.

JAN FEB Mar
Budgeting cost of goods sold $70,000 $74,000 $80,000
plus: desired ending inventory 7,400 ? ?
inventory needed 77,400 ? ?
less: beginning inventory 18,000 ?
required purchases (on account) $59,400 ? ?

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.

Explanation / Answer

Inventory purchase Budget a) Jan Feb Mar Total Budgeted Sales $70,000 $74,000 $80,000 $224,000 Add: Desired ending Inventory 7,4 7,400 8,000 8,500 8,500 Total needs 77,400 82,000 88,500 232,500 Less: Beginning Inventory 18,000 7,400 8,000 18,000 Required Production 59,400 74,600 80,500 214,500 Ending inventory balance is equal to 10% of the following month's cost of goods sold b) Costof goods sold on its first quarter Beginning Inventory $18,000 Add:Cost of goods purchased 214,500 Cost of goods available for sale 232,500 Less:Ending Inventory 8,500 Cost of goods sold 224,000 c) Theamount of ending inventory the company will report on its pro forma Balance sheet at the end of the first quarter is 8,500

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