2. Complete the following: Merchandise Purchases Budget Budgeted cost of goods sold Add desired ending inventory Total needs: Less beginning inventory Required purchases *$70,000.sales x 70% = $49,000. t$80,000 X 70% X 20% = $11,200. January February March Quarter $49,000* 11,200 60,200 9,800 $50,400
2. Complete the following: Merchandise Purchases Budget Budgeted cost of goods sold Add desired ending inventory Total needs: Less beginning inventory Required purchases *$70,000.sales x 70% = $49,000. t$80,000 X 70% X 20% = $11,200. January February March Quarter $49,000* 11,200 60,200 9,800 $50,400
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please explain how to calculate “Less Beginning Inventory” for February & March.

Transcribed Image Text:2. Complete the following:
Merchandise Purchases Budget
Budgeted cost of goods sold
Add desired ending inventory.
Total needs:
Less beginning inventory.
Required purchases
*$70,000.sales x 70% = $49,000.
$80,000 × 70% × 20% = $11,200.
January February March Quarter.
$49,000*
11,200t
60,200
9,800
$50,400

Transcribed Image Text:The following data relate to the operations of Picanuy Corporation, a wholesale distributor of
consumer goods:
a.
b.
C.
d.
e.
f.
g.
h.
Current assets as of December 31:
Cash.
Accounts receivable
Inventory..
Buildings and equipment, net.
Accounts payable
Capital stock..
Retained earnings.
$6,000
$36,000
$9,800
$110,885
$32,550.
$100,000.
$30,135
The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.)
Actual and budgeted sales data are as follows:
December (actual).
January.
February..
March..
April
$60,000
$70,000
$80,000
$85,000
$55,000.
Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following
sale. The accounts receivable at December 31 are the result of December credit sales.
Each month's ending inventory should equal 20% of the following month's budgeted cost of
goods sold.
One-quarter of a month's inventory purchases is paid for in the month of purchase; the other
three-quarters is paid for in the following month. The accounts payable at December 31 are
the result of December purchases of inventory.
Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (exclud-
ing depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is
$2,400 for the quarter and includes depreciation on new assets acquired during the quarter.
Equipment will be acquired for cash: $3,000 in January and $8,000 in February.
Management would like to maintain a minimum cash balance of $5,000 at the end of each
month. The company has an agreement with a local bank that allows the company to borrow
in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000.
The interest rate on these loans is 1% per month, and for simplicity, we will assume that inter-
est is not compounded. The company would, as far as it is able, repay the loan plus accumu-
lated interest at the end of the quarter.
moth
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