equal to 20% of the next month's budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are August (actual), $325,000; September (actual), $320,000; October (estimated), $250,000; and November (estimated), $310,000. Use this information to determine October's expected cash payments for purchases. Calculate Monthly Purchases: August September October November Budgeted ending inventory Cost of goods sold (estimated) 195,000 192,000 150,000 Required available inventory Budgeted beginning inventory Required purchases $ 0 $ 0 $ 0 Calculate Payments Made for Inventory: August purchases September purchases October purchases Purchases August - Purchases paid in September October After October Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchases Hardy Company's cost of goods sold is consistently 60% of sales. The company plans ending merchandise inventory for each month equal to 20% of the next month's budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are August (actual), $325,000; September (actual), $320,000; October (estimated), $250,000; and November (estimated), $310,000. Use this information to determine October's expected cash payments for purchases. Calculate Monthly Purchases: August September October November Budgeted ending inventory Required available inventory Required purchases Calculate Payments Made for Inventory: August purchases September purchases October purchases -Purchases paid in Purchases August September October After October Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchases Calculation Inc Stmt Bal Sheet Calculate the budgeted cash receipts and cash payments. Calculation of Cash Receipts From Sales -Collected in July 31 Total Sales May June July Accounts Rec. Credit sales from: May $ 1,720,000 $ 516,000 $ 860,000 + $344,000 ( 0 June 1,200,000 0 360,000 600,000 240,000 July 1,400,000 0 420,000 980,000 Totals 4,320,000 $516,000 $1,220,000 $ 1,364,000 $ 1,220,000 Calculation of Cash Payments for Merchandise -Paid in- July 31 Accounts July Pay. Total Purchases June Purchases from: June $ 700,000 $ 420,000 $ 280,000 0 July 750,000 0 450,000 300,000 Totals $ 1,450,000 420,000 $ 730,000 $ 300,000 Sales Cost of goods sold Gross profit Operating expenses: Salaries expense Depreciation expense ACCO CO. Budgeted Income Statement For Month Ended July 31 $ 1,400,000 770,000 Bank loan interest expense Other cash expenses Total operating expenses Income before taxes Income tax expense Net income ACCO CO. Budgeted Balance Sheet As of July 31 285,000 36,000 6,600 200,000 630,000 527,600 102,400 30,720 $ 71,680 Assets ACCO CO. Budgeted Balance Sheet As of July 31 Cash $122,400 Accounts receivable 1,220,000 Inventory 60,000 Total current assets 1,402,400 Equipment 1,600,000 Accumulated depreciation (316,000) ( Equipment, net 1,284,000 $ Total assets 2,686,400 Liabilities and Equity Liabilities Accounts payable Salaries payable Income taxes payable Total current liabilities Bank loan payable Total liabilities Stockholders' Equity $ 300,000 60,000 30,720 390,720 660,000 1,050,720 Common stock 600,000 Retained earnings 1,035,680 ( Total Stockholders' equity 1,635,680 Accounts payable Salaries payable Income taxes payable Total current liabilities Bank loan payable Total liabilities Stockholders' Equity Common stock $ 300,000 60,000 30,720 390,720 660,000 1,050,720 Retained earnings Total Stockholders' equity Total Liabilities and Equity 600,000 1,035,680 1,635,680 $ 2,686,400