Question

Assume a merchandising company’s estimated sales for January, February, and March are $119,000, $139,000, and $129,000, respectively. Its cost of goods sold is always 45% of its sales. The company always maintains ending merchandise inventory equal to 20% of next month’s cost of goods sold. It pays for 20% of its merchandise purchases in the month of the purchase and the remaining 80% in the subsequent month. What is the accounts payable balance at the end of February?

Multiple Choice

• $12,330

• $44,280

• $49,320

• $45,470

Answer 1

Answer- The accounts payable balance at the end of February = $49320.

Explanation- Accounts payable balance at the end of February = February month purchases*80%

= $61650*80%

= $49320

CALCULATION OF BUDGETED PURCHASES
PRATICULARS	JANUARY	FEBRUARY
Cost of goods sold	$119000*45%= $53550	$139000*45%= $62550
Add- Ending inventory	$62550*20% = $12510	($129000*45%*20%) = $11610
Less- Beginning inventory	$53550*20%= $10710	$12510
Cost of merchandise purchased	$55350	$61650