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Hardy Company's cost of goods sold is consistently 60% of sales. The company plans ending merchandise inventory for each month equal to 30% of the
Hardy Company's cost of goods sold is consistently 60% of sales. The company plans ending merchandise inventory for each month equal to 30% of the next month's budgeted cost of goods sold. All merchandise is purchased on credit, and 40% of the purchases made during a month is paid for in that month. Another 45% 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), $385,000; September (actual), $410,000; October (estimated) $270,000; and November (estimated), $400,000. Use this information to determine October's expected cash payments for purchases. Calculate Monthly Purchases: October November $ 72,000 August September 73,800 $ 48,600 $ 231,000 246,000 304,800 294.600 115,500 x 73,800 162,000 Budgeted ending inventory Cost of goods sold (estimated) Required available inventory Budgeted beginning inventory Required purchases 240,000 234,000 48,600 $ 189,300 $ 220,800 $ 185,400 Calculate Payments Made for Inventory: Purchases $ 189,300 $ August purchases September purchases October purchases Purchases paid in After August September October October 231,000 X $ 192.000 X $ 74,160 X $ (307,860) 0 28,395 x 99,360$ 93,045 0 28,395 X $ 157,005 231,000 220,395 201,915 $ (57,810) 220,800 185,400 Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchases $ 201,915
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