Information pertaining to Yekstop Corps sales revenue is pre

Information pertaining to Yekstop Corp.\'s sales revenue is presented below: November December January Cash sales $96,000 $125,000 $78,000 Credit sales 288,000 450,000 234,000 Total sales $384,000 $575,000 $312,000 Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices. Budgeted January cash payments for December inventory purchases by Yekstop Corp. are:

Solution

December sales, at cost = ($575,000 × 60%) =$345,000 Desired Beginning Inventory, December—at selling prices = (75% × $575,000) = $431,250 Desired Beginning Inventory, December—at cost = $431,250 × 60% = $258,750 Desired Ending Inventory, December—at selling prices of January = (75% × $312,000) = $234,000 Desired Ending inventory, December—at cost = $234,000 × 60% = $140,400 Total budgeted inventory purchases in December = December sales (at cost) + December ending inventory (at cost) - December beginning inventory (at cost) = $345,000 + $140,400 - $258,750 = $226,650 Budgeted Cash payment in january for the purchases for the onth of December = $226650*(1-0.30) = $158655