Fanning, Inc. sells fireworks. The company’s marketing director developed the fo

Question

Fanning, Inc. sells fireworks. The company’s marketing director developed the following cost of goods sold budget for April, May, June, and July.

Fanning had a beginning inventory balance of $3,500 on April 1 and a beginning balance in accounts payable of $15,300. The company desires to maintain an ending inventory balance equal to 15 percent of the next period’s cost of goods sold. Fanning 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

Prepare an inventory purchases budget for April, May, and June.

Determine the amount of ending inventory Fanning will report on the end-of-quarter pro forma balance sheet.

Prepare a schedule of cash payments for inventory for April, May, and June.

Determine the balance in accounts payable Fanning will report on the end-of-quarter pro forma balance sheet.

P.S. - I am stuck with parts C & D

Explanation / Answer

Inventory Purchase Budget April May june July Budgeted cost of goods sold 73,000 83000 93000 99000 Add: Cosing Inventory desired 12450 13950 14850 (15% of next month COGS) (83000*15%) (93000*15%) (99000*15%) Total needs 85,450 96,950 107,850 Less: opening Inventory 3,500 12,450 13,950 (Given) Budgeted Inventory Purchases in $ 81,950 84,500 93,900 Amount of Closing Inventory at the end of Quarter is   $14,850 (i.e. closing inventory of June) April May june Total Opening Accounts receivable 15300 15300 April Month Purchase 53267.5 28682.5 81950 May Month purchases 54925 29575 84500 June Month Purchases 61035 61035 Total Cash disbursement 68567.5 83607.5 90610 242785 Accounts Payable balance at the second Quarter (June purchase *35%) ( i.e. 93900*35%)   $ 32,865

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.