Peabody, Inc., sells fireworks. The company\'s marketing director developed the

Question

Peabody, Inc., sells fireworks. The company's marketing director developed the following cost of goods sold budget for April, May, June, and July ril May June Jul Budgeted cost of goods sold $65,000 $75,000 $85,000 $91,000 Peabody had a beginning inventory balance of $3,200 on April 1 and a beginning balance in accounts payable of $15,800. The company desires to maintain an ending inventory balance equal to 15 percent of the next period's cost of goods sold. Peabody makes all purchases on account. The company pays 65 percent of accounts payable in the month of purchase and the remaining 35 percent in the month following purchase Required a. Prepare an inventory purchases budget for April, May, and June Inventory Purchases Budget Budgeted cost of goods sold Plus: Desired ending inventory Inventory needed Less: Beginning inventory Required purchases (on account) April May June $ 65,000 $ 75,000 85,000 65,000 75,000 85,000 65,000 $ 75,000 $ 85,000

Explanation / Answer

a.)

Inventory Purchase Budget

Apr

May

June

Budgeted Cost of Goods Sold

$        65,000

$       75,000

$       85,000

Add: Desired Ending Inventory

$        11,250

$       12,750

$       13,650

Inventory Needed

$        76,250

$       87,750

$       98,650

Less : Beginning Inventory

$        (3,200)

$     (11,250)

$     (12,750)

Required puchases(on Account)

$        73,050

$       76,500

$       85,900

b. Ending Inventory= $13,650

Working Notes:

Working Notes

Inventory Purchase Budget

Apr

May

June

July

Budgeted Cost of Goods Sold

$        65,000

$       75,000

$       85,000

$        91,000

Add: Desired Ending Inventory

$        11,250

$       12,750

$       13,650

$                  -  

Inventory Needed

$        76,250

$       87,750

$       98,650

$        91,000

Less : Beginning Inventory

$        (3,200)

$     (11,250)

$     (12,750)

$      (13,650)

Required puchases(on Account)

$        73,050

$       76,500

$       85,900

$        77,350

c.

Schedule of Cash Payments

Apr

May

June

July

Less:Payment of Previous Accouts Payable

$              25,568

$            26,775

$                                                                   30,065

Less:Payment of Current Accouts Payable

$                           47,483

$              49,725

$            55,835

$                                                                   50,278

Total Payment

$                           47,483

$              75,293

$            82,610

$                                                                   80,343

Working Notes:

Schedule of Cash Payments

Apr

May

June

July

Beginging Accouts Payable

$        15,800

$       41,368

$       42,575

$        45,865

Total Purchases

$        73,050

$       76,500

$       85,900

$        77,350

Amount Due to Accouts Payable

$        88,850

$     117,868

$     128,475

$      123,215

Less:Payment of Previous Accouts Payable

$       25,568

$       26,775

$        30,065

Less:Payment of Current Accouts Payable

$        47,483

$       49,725

$       55,835

$        50,278

Total Payment

$        47,483

$       75,293

$       82,610

$        80,343

Ending Accouts Payable

$        41,368

$       42,575

$       45,865

$        42,873

d.

Schedule of Cash Payments

Apr

May

June

July

Beginging Accouts Payable

$        15,800

$       41,368

$       42,575

$        45,865

Total Purchases

$        73,050

$       76,500

$       85,900

$        77,350

Amount Due to Accouts Payable

$        88,850

$     117,868

$     128,475

$      123,215

Less:Payment of Previous Accouts Payable

$       25,568

$       26,775

$        30,065

Less:Payment of Current Accouts Payable

$        47,483

$       49,725

$       55,835

$        50,278

Total Payment

$        47,483

$       75,293

$       82,610

$        80,343

Ending Accouts Payable

$        41,368

$       42,575

$       45,865

$        42,873

Ending Accounts Payable for Quarter Ending ie june= $45,865

Inventory Purchase Budget

Apr

May

June

Budgeted Cost of Goods Sold

$        65,000

$       75,000

$       85,000

Add: Desired Ending Inventory

$        11,250

$       12,750

$       13,650

Inventory Needed

$        76,250

$       87,750

$       98,650

Less : Beginning Inventory

$        (3,200)

$     (11,250)

$     (12,750)

Required puchases(on Account)

$        73,050

$       76,500

$       85,900

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