question archive A 2019 cash budget is being prepared for the purchase of Primer, a merchandise item
A 2019 cash budget is being prepared for the purchase of Primer, a merchandise item
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A 2019 cash budget is being prepared for the purchase of Primer, a merchandise item. Budgeted data are: Cost of goods sold for 2019 P300,000;Accounts payable 1/1/19 20,000; Inventory, 1/1/19 30,000; Inventory 12/31/19 42,000. Purchases will be made in twelve equal monthly amounts and paid for in the following month.
What is the 2019 budgeted cash payment for purchases of Primer?
A. P295,000
B. P300,000
C. P306,000
D. P312,000
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C. P306,000
Step-by-step explanation
Budgeted cash payment = Accounts Payable + Purchases in 2019
Budgeted cash payment = 20,000 + [ (11/12) (312,000)]
Budgeted cash payment = 20,000 + 286,000
Budgeted cash payment = 306,000
Only 11/12 of the 2019 purchases, i.e., the purchases made in the first eleven months, will be paid for in 2005 under the company's policy of payment for purchases.
