Budgeted sales for SKATE SHOP for the first three months of 2016 are as follows:

Question

Budgeted sales for SKATE SHOP for the first three months of 2016 are as follows: SKATE SHOP sells to retail customers and to several wholesale customers on credit. The following trend has been established regarding cash collection of sales: 65% collected in the month of sale, 35% collected in the month following sales. The accounts receivable balance on December 31, 2015 is $328,000. Prepare a cash receipts budget for January, February, and March of 2016. Beginning inventory for 2016 is $20,000. The desired budgeted inventory at the end of a month is 40 percent of the COGs to be sold the following month. Prepare a purchases budget for SKATE SHOP for each month, January through March. If purchase are paid for 50% in the month of purchase and 50% in the month following purchase, what will the budgeted accounts payable (AP) balance be at March 31, 2016? Show your calculation.

Explanation / Answer

12) Particulars January February March April Budgeted Sales 65000 80000 100000 105000 Cash Collections from current month 42250 52000 65000 68250 Cash collected from prior month sales 28000 22750 28000 35000 Total cash collected 70250 74750 93000 103250 ` 13) Particulars January February March Desired Ending Inventory 26000 32000 40000 Add: Cost of Goods sold 65000 80000 100000 Required Inventory 91000 112000 140000 Less: Beginning Inventory 20000 26000 32000 Purchases 71000 86000 108000 14) Particulars January February March Purchases 71000 86000 108000 Cash payments during current month 35500 43000 54000 Cash payments following month sales 35500 43000 Total cash collected 35500 78500 97000 Ending Accounts payable balance 108000*0.5 54000

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