5th Edition

ISBN: 9781264010653

Author: Edmonds

Publisher: MCGRAW-HILL HIGHER EDUCATION

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Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in…

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Textbook Question

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.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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Chapter 14, Problem 8E

Chapter 14, Problem 10E

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Chapter 14 Solutions

SURVEY OF ACCOUNTING(LL)>CUSTOM PKG.<

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Solution Summary: The author explains the amount of purchase budgeted for July. The company pays 70% of its purchase during the month and remaining in moth following the purchase.

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