Hardy Companys cost of goods sold is consistently 70% of sales. The company plans ending merchandise inventory for each month equal to 20% of the next months 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), $375,000; September (actual), $390,000; October (estimated), $260,000; and November (estimated), $370,000.

Exercise 20-27A Merchandising: Computing budgeted cash payments for purchases LO P4 Hardy Company's cost of goods sold is consistently 70% 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 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), $375,000; September (actual), $390,000; October (estimated) $260,000; and November (estimated), $370,000. 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) Required available inventory Budgeted beginning inventory Required purchases Calculate Payments Made for Inventory: ---------- Purchases paid in -------------- September October After October Purchases August August purchases September purchases October purchases Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchases