Jordan, Inc. sells fireworks. The company’s marketing director developed the fol
ID: 2414033 • Letter: J
Question
Jordan, Inc. sells fireworks. The company’s marketing director developed the following cost of goods sold budget for April, May, June, and July.
Jordan had a beginning inventory balance of $2,900 on April 1 and a beginning balance in accounts payable of $14,100. The company desires to maintain an ending inventory balance equal to 20 percent of the next period’s cost of goods sold. Jordan makes all purchases on account. The company pays 65 percent of accounts payable in the month of purchase and the remaining 35 percent in the month following purchase.
Required
Prepare an inventory purchases budget for April, May, and June.
Determine the amount of ending inventory Jordan will report on the end-of-quarter pro forma balance sheet.
Prepare a schedule of cash payments for inventory for April, May, and June.
Determine the balance in accounts payable Jordan will report on the end-of-quarter pro forma balance sheet.
April May June July Budgeted cost of goods sold $64,000 $74,000 $84,000 $90,000Explanation / Answer
Inventory purchases budget : April May June B COGS 64000 74000 84000 Des End Inv 14800 16800 18000 Total reqd 78800 90800 102000 Less: Op Inv 2900 14800 16800 Inv to purchase 75900 76000 85200 Amount of ending inventory to report in B/s: $18000 Cash payment to Inventory : April May June Purchases 75900 76000 85200 Payt of Mar 14100 Apr 49335 26565 May 49400 26600 Jun 55380 Total payment 63435 75965 81980 Balance in AP at the end of quarter: =85200*0.35=$29820
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