Hardy Company_Computation of monthly purchase and cash payment

Hardy Company”scost of goods sold is consistently 60% of sales.

The company plans to carry ending merchandise inventory for each month equal to 20% of the next month”s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are: August (actual), $325,000; September (actual), $320,000; October (estimated), $250,000; November (estimated), $310,000.

Use this information to determine October”s expected cash payments for purchases.
Calculate monthly purchases & calculate payments made for inventory.

Solution

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