Dickey Books buys books and magazines directly from publishers and distributes t

Question

Dickey Books buys books and magazines directly from publishers and distributes them to grocery stores. The wholesaler expects to purchase the following inventory:

Dickey Books’ accountant prepared the following schedule of cash payments for inventory purchases. Dickey Books’ suppliers require that 90 percent of purchases on account be paid in the month of purchase; the remaining 10 percent are paid in the month following the month of purchase.

Required

Complete the schedule of cash payments for inventory purchases by filling in the missing amounts.

Determine the amount of accounts payable the company will report on its pro forma balance sheet at the end of the second quarter.

April May June Required purchases (on account) $ 70,000 $ 80,000 $ 95,000

Explanation / Answer

Answer:-1)

2)-Amounts of accounts payable at the end of the second quarter:-

June month creditor =$95000*10% =$9500

Dickey Book's Schedule of cash payments for inventory purchases Particulars April May June $ $ $ Purchases on account 70000 80000 95000 Cash Payment for purchases 90% of purchases paid in the month of purchase (a) 70000*90% = 63000 80000*90%=72000 95000*90%=85500 10% paid in the month following the month of purchase (b) 70000*10%=7000 80000*10%=8000 Total cash payment for purchases 63000 79000 93500

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