Question

Dickey Books buys books and magazines directly from publishers and distributes them to grocery stores. The wholesaler expects to purchase the following inventory:April May JuneRequired purchases (on account) $70,000 $80,000 $95,000
Dickey Books’ accountant prepared the following schedule of cash payments for inventory purchases. Dickey Books’ suppliers require that 90 percent of purchases on account be paid in the month of purchase; the remaining 10 percent are paid in the month following the month of purchase.Required:1. Complete the schedule of cash payments for inventory purchases by filling in the missing amounts.2. Determine the amount of accounts payable the company will report on its proforma balance sheet at the end of the second quarter.

Answer 1

Answer:

a)

 Schedule of Cash Payments for Inventory Purchases

                                                April               May                June

Payment for current

accounts payable                 $ 63,000         $ 72,000         $ 85,500

Payment for previous

accounts payable               $4,000            $7,000           $ 8,000

Total budgeted

payments for inventory        $ 67,000         $79,000     $93,500

70000*90%=63000;80000*90%=72000;95000*90%=8550

b)

9500    

Since 90% of the current purchases on account are paid in cash during the month of purchase, 10% will remain payable at the end of the month, $95,000.