Peabody, Inc., sells fireworks. The company’s marketing director developed the f
ID: 2487265 • Letter: P
Question
Peabody, Inc., sells fireworks. The company’s marketing director developed the following cost of goods sold budget for April, May, June, and July.
Budgeted cost of goods sold: April - $70,000; May - $80,000; June - $90,000; July - $96,000
Peabody had a beginning inventory balance of $3,900 on April 1 and a beginning balance in accounts payable of $14,700. 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 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the month following purchase.
Prepare an inventory purchases budget for April, May, and June.
Budgeted Cost of Goods Sold
Plus: Desired ending inventory
Inventory needed
Less: Beginning inventory
Required purchases (on account)
Determine the amount of ending inventory Peabody will report on the end-of-quarter pro forma balance sheet.
Ending Inventory - ??
Prepare a schedule of cash payments for inventory for April, May, and June.
Payment of Current accounts payable
Payment of Previouis accounts payable
Total budgeted payments for inventory
Determine the balance in accounts payable Peabody will report on the end-of-quarter pro forma balance sheet.
Accounts payable = ??
a.Prepare an inventory purchases budget for April, May, and June.
Budgeted Cost of Goods Sold
Plus: Desired ending inventory
Inventory needed
Less: Beginning inventory
Required purchases (on account)
b.Determine the amount of ending inventory Peabody will report on the end-of-quarter pro forma balance sheet.
Ending Inventory - ??
c.Prepare a schedule of cash payments for inventory for April, May, and June.
Payment of Current accounts payable
Payment of Previouis accounts payable
Total budgeted payments for inventory
d.Determine the balance in accounts payable Peabody will report on the end-of-quarter pro forma balance sheet.
Accounts payable = ??
Explanation / Answer
A. inventory purchases budget April May June Budgeted Cost of Goods Sold $70,000 $80,000 $90,000 $96,000 Plus: Desired ending inventory 12000 13500 14400 [$80000*15%] [$90000*15%] [$96000*15%] Inventory needed $82,000 $93,500 $104,400 Less: Beginning inventory $3,900 12000 13500 Required purchases (on account) $78,100 $81,500 $90,900 B the amount of ending inventory Peabody will report on the end-of-quarter pro forma balance sheet. is $14400 [ $96000*15%] April May June C Opening Accounts Payable $14,700 $23,430 $24,450 Add: purchases during the year [refer to Ans of A] $78,100 $81,500 $90,900 Less: Payment made 70 % of purchases in same month 54670 57050 63630 [$78100*70%] [81500*70%] [90900*70%] 30% of purchase in subsequent month $14,700 23430 24450 [assumed paid of previous month] [$78100*30%] [81500*30%] Closing Balance of accounts payable $23,430 $24,450 $27,270 D The balance in accounts payable Peabody will report on the end-of-quarter pro forma balance sheet. is $27270
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