Heely Co. has the following projected sales in units for the first quarter of 20

Question

Heely Co. has the following projected sales in units for the first quarter of 20x2: 10748 14141 January February March Heely Co s budget is based on the following assumptions: 33% of all purchases of merchandise are paid in the month purchased and the remainder in the following month The number ofunts in each month's ending inventory is equal to 64% of the next month's units of sales. The cost of each unit of inventory is $16. What is the company's accounts payable balance at the end of February? Select one a. $154075 b. $151592 X ?. $130796 d. $64422 The correct answer is $130796

Explanation / Answer

c. $ 130796

Working:

Step-1:Calculation of Each month's ending inventory January February March Units sold        10,748        14,141               11,110 Ending Units of: December      10,748 x 64% =         6,879 January      14,141 x 64% =         9,050 February      11,110 x 64% =         7,110 Step-2:Calculation of Purchase February Sales        14,141 Ending Units           7,110 Units available for sale        21,251 Less:Beginning Units           9,050 Units Purchased        12,201 Step-3:Calculation of Accounts Payable at the end of February Accounts Payable is the balance of credit purchase remained unpaid. Each month 33% of Purchase is paid.It means 67%(100%-33%) is remained unpaid each month. Accounts Payable balance at the end of February = Purchase of February in units x Unit cost x 67% =               12,201 x $    16.00 x 67% = $       1,30,796

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