Question

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below:

The June 30th balance sheet follows:

Cash	$ 25,000		Accounts payable	$ 45,000
Accounts receivable	110,000		Capital stock	300,000
Inventory	54,000		Retained earnings	94,000
Building and equipment (net)	250,000

Actual sales for June and budgeted sales for July, August, and September are given below:

June	$137,500
July	360,000
August	400,000
September	320,000

Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts.

The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's cost of sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.

The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.

What is the balance of the inventory account at the end of July?

$60,000

$124,000

$216,000

$54,000

Answer 1

calculation of ending inventory :

particular	june	july	august	september
sales	$137500	$360000	$400000	$320000
less : gorss margin (40% of sales)	137500 x 40% = -55000	360000 x 40% = -144000	400000 x 40% = -160000	320000 x 40% = -12800
cost of sales	$82500	$216000	$240000	$192000
desired ending inventory (25% of the following month's cost of sales)	$216000 x 25% = $54000	$240000 x 25% = $60000	$192000 x 25% = $48000

ending inventory = $60000

correct option is a) $60000

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