Question

Ahmed Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,600,000; June, $1,490,000; July, $1,425,000; and August, $1,495,000.
Accounts Payable Merchandise Inventory
May 31 $150,000 $250,000
June 30 200,000 400,000
July 31 235,000 300,000
August 31 195,000 330,000
Use the available information to compute the budgeted amounts of (1) Merchandise purchases for June, July, and August (2) Cost of goods sold for June, July, and August.

Answer 1

Answer:

Explanation:

The merchandise purchase can be determined by using the formula:

Purchase = Cash payments + Ending Accounts Payable - Beginning Accounts Payable

For June:

Purchase = $(1490000 + 200000 - 150000)

Purchase = $(1690000 -  150000)

Purchase = $1540000

For July:

Purchases: $(1425000+235000 - 200000)

Purchases =  $(1660000 - 200000)

Purchases = $1460000

For August:

Purchases: $(1495000 + 195000 - 235000)

Purchases: $(1690000 - 2235000)

Purchases: $1455000

The cost of goods sold = Beginning Inventory + Purchase - Ending inventory

For June:

Cost of goods sold= $(250000 + 1540000 - 400000)

Cost of goods sold= $(1790000 - 400000)

Cost of goods sold = $1390000

For July:

Cost of goods sold = $(400000 + 1460000 - 300000)

Cost of goods sold = $(1860000 -  300000)

Cost of goods sold = $1560000

For August:

Cost of good sold = $(300000+ 1455000 - 330000)

Cost of good sold = $(1755000 - 330000)

Cost ofgood sold = $1425000