Franklin Company, which sells electric razors, had $350,000 of cost of goods sol

Question

Franklin Company, which sells electric razors, had $350,000 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 $25,000, and the desired ending inventory balance for July is $26,000. Franklin pays cash to settle 75 percent of its purchases on account during the month of purchase and pays the remaining 25 percent in the month following the purchase. The accounts payable balance as of June 30 was $36,000.

Required

Determine the amount of purchases budgeted for July.

Determine the amount of cash payments budgeted for inventory purchases in July.

Explanation / Answer

(a)
COGS = 350000 x 105% = 367500
Purchases = 367500 - 25000 + 26000 = 368500

(b)
cash payments = 36000 + (75% * 368500) = 312375

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.