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Assume a merchandising company’s estimated sales for January, February, and March are $119,000, $139,000, and $129,000, respectively
Assume a merchandising company’s estimated sales for January, February, and March are $119,000, $139,000, and $129,000, respectively. Its cost of goods sold is always 45% of its sales. The company always maintains ending merchandise inventory equal to 20% of next month’s cost of goods sold. It pays for 20% of its merchandise purchases in the month of the purchase and the remaining 80% in the subsequent month. What is the accounts payable balance at the end of February?
Multiple Choice
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$12,330
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$44,280
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$49,320
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$45,470
Expert Solution
Answer- The accounts payable balance at the end of February = $49320.
Explanation- Accounts payable balance at the end of February = February month purchases*80%
= $61650*80%
= $49320
| CALCULATION OF BUDGETED PURCHASES | ||
| PRATICULARS | JANUARY | FEBRUARY |
| Cost of goods sold | $119000*45%= $53550 | $139000*45%= $62550 |
| Add- Ending inventory | $62550*20% = $12510 | ($129000*45%*20%) = $11610 |
| Less- Beginning inventory | $53550*20%= $10710 | $12510 |
| Cost of merchandise purchased | $55350 | $61650 |
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