Nunn Company, which sells electric razors, had $200,000 of cost of goods sold du
ID: 2577279 • Letter: N
Question
Nunn Company, which sells electric razors, had $200,000 of cost of goods sold during the month of June. The company projects a 5 percent increase in cost of goods sold during July. The inventory balance as of June 30 is $15,000, and the desired ending inventory balance for July is $16,000. Nunn pays cash to settle 70 percent of its purchases on account during the month of purchase and pays the remaining 30 percent in the month following the purchase. The accounts payable balance as of June 30 was $18,000.
Required
Determine the amount of purchases budgeted for July.
Determine the amount of cash payments budgeted for inventory purchases in July.
Explanation / Answer
Amount of purchases budgeted in July:-
Desired Inventory balance for July = $16,000
Less:-Inventory balance as of June 30 = $ 15,000
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$ 1,000
Add: Cost of Goods Sold $ 210,000 (200,000+5%)
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$ 211,000
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Amount of cash payments budgeted for inventory purchases in July= $211,000*70%=$147,700
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