Question

Sentra Sporting Company sells tennis rackets and other sporting equipment. The purchasing department manager prepared the...

Sentra Sporting Company sells tennis rackets and other sporting equipment. The purchasing department manager prepared the inventory purchases budget. Sentra's policy is to maintain an ending inventory balance equal to 15% of the following month's cost of goods sold. January's budgeted cost of goods sold is $125,000.

October November December
Budgeted Cost of Goods Sold 115,000 95,000 105,000
Plus: Desired Ending Inventory 28,000 ? ?
Inventory Needed 143,000 ? ?
Less: Beginning Inventory 20,000 ? ?
Required purchases (on Account) 123,000 ? ?



What would be the required purchases (on account) for December?

Multiple Choice

  • $91,000

  • $108,000

  • $123,200

  • $105,000

Business   Accounting   
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Homework Answers

Answer #1

Your required answer is option B i.e. $108,000

Explanation:

Note: It seems that ending inventory in october is incorrect because it should be $14,250 (15% of 95,000), However it will not affect the beginning or ending inventory of December.

I hope this clear your doubt.

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