Question

Ahmed Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,400,000; June, $1,400,000; July, $1,250,000; and August, $1,300,000

	Accounts Payable			Merchandise Inventory
May 31	$	180,000		$	250,000
June 30		160,000			300,000
July 31		300,000			400,000
August 31		180,000			300,000

(1) Compute the budgeted amounts of merchandise purchases.
Budgeted amounts:	June	July	August
Ending accounts payable
Payments on account
Subtotal	0	0	0
Beginning accounts payable
Purchases	$0	$0	$0
(2) Compute the budgeted amounts of cost of goods sold.
Budgeted amounts:	June	July	August
Beginning inventory
Purchases
Cost of goods available for sale
Ending inventory	(300,000)	(400,000)	(300,000)
Cost of goods sold

Answer 1