What formula is used in this question?

blal 2. Use the familiar identity, Beginning Inventory plus Purchases equals Cost of Goods Sold plus Ending Inventory. To compute required purchases, compute the inventory needed (Cost of Goods Sold plus Ending Inventory) and then subtract the amount that will come from Beginning Inventory: July Merchandise Purchases Cost of goods sold ($2,076,000 + 1.20) $1,730,000 Add: Target ending inventory 25 x ($2,184,000 + 1.20) 455.000 Cost of goods needed $2,185,000 Less: Beginning inventory 25 x ($2,076,000 = 1.20) 432.500 Required Purchases $1.752 500 7-29 Purchases and Sales Budgets All sales of Tracy's Jeans and Uniforms (TJU) are made on credit. Sales are billed twice monthly, on the fifth of the month for the last half of the prior mouth's sales and on the twentieth of the month for the first half of the current month's sales. For accounts paid within the first 10 days after the billing date, TJU gives customers a 2% discount; otherwise the full amount is due within 30 days of the billing date, and customers that do not pay within the 10-day discount period generally wait the full 30 days before making payment. Based on past experience, the collection experience of accounts receivable is as follows: Within the 10-day discount period 70% At 30 days after billing 28% Uncollectible 2% Sales for May 20X8 were $790,000. The forecast sales for the next 4 months are as follows: June July August September $810,000 990,000 940,000 660,000 TJU's average markup on its products is 40% of the sales price. TJU purchases merchandise for resale to meet the current month's sales demand and to maintain a desired morithly ending inventory of 25% of the next month's cost of goods sold. All purchases are on credit. TJU pays for one-half of a month's purchases in the month of purchase and the other half in the mouth following the purchase. All sales and paachases occur uniformly throughout the month.1. How much cash can TJU plan to collect from accounts receivable collections during July 20X87 2. Compute the budgeted dollar value of TJU inventory on May 31, 20X8. 3. How much merchandise should TJU plan to purchase during June 20X87 4. How much should TJU budget in August 20X8 for cash payments for merchandise purchased? Solution 1. July collections include: May sales billed June 5, 28 x .5 x $790,000_ $110,600 June sales billed June 20, .28 x _5 x $810,000 113,400 June sales billed July 5, .70 x 5 x $810,000 > .98 277,830 July sales billed July 20, 70 x 5 x $990,000 x 98 339.570 Total 3841 400 2. .60 x 25 * $810,000 = $121,500 3. Ending inventory, .60 x .25 * $990,000 $148,500 Merchandise needed for current month's sales, -60 x $810,000 486.000 Total needs 634,500 Beginning inventory, 60 x .25 x 3810,000 121 500 Required Purchases $513.000 July August Ending inventory, .60 x 25 x next month's sales $141,000 $ 09.000 Merchandise needed for current month's sales, .60 x sales 504,000 564.000 Total needs 735,000 663,000 Beginning inventory, .60 x 125 > current month's sales 148.500 141,000 Required Purchases $586.500 $522.000 Payments, 1/2 of current purchases, 1/2 of preceding month's purchases, 5 x $586,500 +.5 x $522,000 $554.250