The Nevada Company’s Accountant is in the process of preparing the company’s bud
ID: 2558190 • Letter: T
Question
The Nevada Company’s Accountant is in the process of preparing the company’s budgeted financial statements for May and has the following information.
March April May
Credit Sales 180,000 270,000 450,000
Purchases of Inventory 150,000 300,000 600,000
Assuming collection of credit sales is expected as follows: 20% during the month of sale; 75% during the month following the sale; 5% in the second month following the sale.
All inventory purchases are on account. 25% of the purchases are paid for in the month of purchase. The remaining 75% is paid for in the month following the purchase.
What is the balance in Accounts Receivable at May 31?
$373,500
$389,000
$432,000
$365,250
What is the estimated total amount of cash disbursement for purchases of inventory in May?
$160,000
$150,000
$225,000
$375,000
What is the balance in Accounts Payable at the end of May?
$400,000
$150,000
$450,000
$300,000
For next year, Roberto, Inc., has budgeted sales of 15,000 units, targeted ending finished goods inventory of 750 units, and beginning finished goods inventory of 450 units. All other inventories are zero. How many units should be produced next year?
14,700 units
15,000 units
15,300 units
16,200 units
Explanation / Answer
Balance in Accounts Receivable at May 31 = 80% of May sales + 5% of April sales
= (450,000*80%) + (270,000*5%)
= 360,000 + 13,500
= 373,500
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Cash disbursement for purchases of inventory in May = 25% of May purchases + 75% of April purchases
= (600,000*25%) + (300,000*75%)
= 150,000 + 225,000
= 375,0000
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Balance in Accounts payable at the end of May = 75% of May purchases
= 600,000*75%
= 450,000
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Units to be produced next year = Sales in units + Ending finished goods inventory - Beginning finished goods inventory
= 15,000 + 750 - 450
= 15,300 units
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