Widden Company, which sells electric razors, had $330,000 of cost of goods sold

Question

Widden Company, which sells electric razors, had $330,000 of cost of goods sold during the month of June. The company projects a 8 percent increase in cost of goods sold during July. The inventory balance as of June 30 is $27,000, and the desired ending inventory balance for July is $28,000. Widden pays cash to settle 75 percent of its purchases on account during the month of purchase and pays the remaining 25 percent in the month following the purchase. The accounts payable balance as of June 30 was $44,000.Required a. Determine the amount of purchases budgeted for July. I figured out that it is $357,400 b. Determine the amount of cash payments budgeted for inventory purchases in July.

Explanation / Answer

Purchase for july = COGS +ending inventory -Beginning Inventory

                       = [330,000 ( 1+ .08) ] + 28000 - 27000

                      = 356400+ 28000-27000

                     = 357400

b)Amount of cash paid = (july purchase *.75 ) + Accounts payable of june

                                 = (357,400 *.75 ) + 44000

                                 = 268050 + 44000

                                 = 312050

**44000 itsself represent 25% of june purchase which will be paid in july.

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