Exercise 7-9B Determining the amount of inventory purchases and cash payments

Clement Oil Corporation, which distributes gasoline products to independent gasoline stations, had $240,000 of cost of goods sold in January. The company expects a 2.5 percent increase in cost of goods sold during February. The ending inventory balance for January is $20,000, and the desired ending inventory for February is $25,000. Clement pays cash to settle 60 percent of its purchases on account Page 337during the month of purchase and pays the remaining 40 percent in the month following the purchase. The accounts payable balance as of January 31 was $19,000.

Required

1. Determine the amount of purchases budgeted for February.

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