Clark’s Retail plans inventory levels (at cost) at the end of each month as foll
ID: 2427596 • Letter: C
Question
Clark’s Retail plans inventory levels (at cost) at the end of each month as follows: May: $271,000, June: $226,000, July: $209,000, and August: $241,000. Sales are expected to be June: $449,000, July: $359,000, August: $306,000. Cost of goods sold is 65% of sales.
Purchases in April were $258,000 and in May they were $188,000. Payments for each month’s purchases are made as follows: 15% during that month, 70% the next month, and the final 15% the next month. Prepare budget schedules for June, July, and August for purchases and for disbursements for purchases.
Explanation / Answer
Solution:
Schedule for Purchases June July August Sales 449,000 359,000 306,000 Cost of Goods sold - 65% 291,850 233,350 198,900 Add: Ending Inventory 226,000 209,000 241,000 Less: Beginning Inventory 271,000 226,000 226,000 Budgeted Purchases 246,850 216,350 213,900