Bella Company, which sells electric razors, had $370,000 of cost of goods sold d

Question

Bella Company, which sells electric razors, had $370,000 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. Bella pays cash to settle 70 percent of its purchases on account during the month of purchase and pays the remaining 30 percent in the month following the purchase. The accounts payable balance as of June 30 was $35,000.

1. Determine the amount of purchases budgeted for July.

2. Determine the amount of cash payments budgeted for inventory purchases in July.

Explanation / Answer

Calculate amount of purchase budgeted for july :

2) Determine amount of cash payment :

Cash payment = (400600*70%+35000) = 315420

Cost of goods sold of july (370000*1.08%) 399600 Add: Desired ending inventory 28000 Total needs 427600 Less: Beginning inventory (27000) Budgeted purchase for july 400600

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