Question

Metro, Inc. sells backpacks. The Company's accountant is preparing the purchases budget for the first quarter operations. Metro maintains ending inventory at 20% of the following month's expected cost of goods sold. Expected cost of goods sold for April is $82,000. All purchases are made on account with 25% of accounts paid in the month of purchase and the remaining 75% paid in the month following the month of purchase.

Sales	January			February			March
Budgeted cost of goods sold	$	46,000		$	62,000		$	66,000
Plus: Desired ending inventory		12,400
Inventory needed		58,400
Less: Beginning inventory		(9,200	)
Required purchases	$	49,200

Based on this information the amount of accounts payable appearing on the March 31 pro forma balance sheet is? Please show your work so I can follow along.

Multiple Choice

• $17,300.

• $51,900.

• $69,200.

• None of the answers is correct.

Answer 1

Sales	January		February		March
Budgeted cost of goods sold	$	46,000	$	62,000	$	66,000
Plus: Desired ending inventory		12,400		66,000 x 20% = 13,200		82,000 x 20% = 16,400
Inventory needed		58,400		75,200		82,400
Less: Beginning inventory		(9,200)		(12,400)		(13,200)
Required purchases	$	49,200	$	62,800	$	69,200

Payment to creditors of goods :

Month of purchase = 25%

Following month = 75%

Accounts payable at March 31 = March purchase x 75%

= 69,200 x 75%

= $51,900

Second option is correct.