Chapter 14, Problem 9E

Exercise 7-9A Determining the amount of expected inventory purchases and cash payments

Nunn Company, which sells electric razors, had $200,000 of cost of goods sold during the month of June. The company projects a 5 percent increase in cost of goods sold during July. The inventory balance as of June 30 is $15,000, and the desired ending inventory balance for July is $16,000. Nunn pays cash to settle 70 percent of its purchases on account during the month of purchase and pays the remaining 30 percent in the month following the purchase. The accounts payable balance as of June 30 was $18,000.

Required

a.    Determine the amount of purchases budgeted for July.

b.    Determine the amount of cash payments budgeted for inventory purchases in July.