Vivian Books buys books and magazines directly from publishers and distributes t
ID: 2449316 • Letter: V
Question
Vivian Books buys books and magazines directly from publishers and distributes them to grocery stores. The wholesaler expects to purchase the following inventory.
Vivian Books’s accountant prepared the following schedule of cash payments for inventory purchases. Vivian Books’s suppliers require that 85 percent of purchases on account be paid in the month of purchase; the remaining 15 percent are paid in the month following the month of purchase.
Complete the schedule of cash payments for inventory purchases by filling in the missing amounts.
Determine the amount of accounts payable the company will report on its pro forma balance sheet at the end of the second quarter.
Vivian Books buys books and magazines directly from publishers and distributes them to grocery stores. The wholesaler expects to purchase the following inventory.
April May June Required purchases (on account) $ 117,000 $ 137,000 $ 149,000Vivian Books’s accountant prepared the following schedule of cash payments for inventory purchases. Vivian Books’s suppliers require that 85 percent of purchases on account be paid in the month of purchase; the remaining 15 percent are paid in the month following the month of purchase.
Required a.Complete the schedule of cash payments for inventory purchases by filling in the missing amounts.
b.Determine the amount of accounts payable the company will report on its pro forma balance sheet at the end of the second quarter.
Explanation / Answer
Answer A
In the given question, 85% of purchase on account to be paid in the month of purchase and rest 15% to be paid in the month following the month of purchase.
Hence for the month of April
Given that 85% of 117000 i.e 99450 is been paid on April only and remaining 15% i.e 17550 will be paid on may.
Similarly for the month of may
85% of 137000 i.e 116450 is paid on may and rest 15% i.e 20550 will be paid on June.
Previous month's 15% ie 17550 is also paid in the month of may.
For the month of June
85% of 149000 i.e 126650 is paid on June and 15% of 149000 i.e 22350 will be paid on July.
Previous month's 15% i.e 20550 is also paid in the month of June.
Answer B
The amount of accounts payable the company will report on its pro forma balance sheet at the end of second quarter is
15% of 149000 i e 22350
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