Exercise 20-5 Merchandising: Computing budgeted cash payments for purchases LO P1

Hardy Companys cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 20% of the next months budgeted cost of good 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; November (estimated), $310,000.

Use this information to determine Octobers expected cash payments for purchases.

Use this information to determine Octobers expected cash payments for purchases.

Calculate Monthly Purchases August to November

Calculate Payments Made for Inventory (purchases Paid in)August to October and after OCtober