Example

The following information pertains to the operating budgets for Casey Corporation.

Budgeted sales: $$200,000$ in January and $$100,000$ in February.

All sales are on credit. Collections for sales are $60\%$ in the month of sale and $40\%$ the

next month.

Cost of goods sold $($COGS$)$ is $75\%$ of sales.

Beginning accounts receivable is $$0.$

Beginning inventory is $$14,000.$

Beginning accounts payable is $$80,000,$ of which $10\%$ is related to sales in November

the year before, the remainder is related to the sales in December the year before.

All purchases are on credit. Purchases are paid $20\%$ in the month of purchase, $60\%$

the next month, the remainder in the month after the next.

Desired ending inventory is $20\%$ of next month's COGS.

Required:

Compute the following:

$($a$)$ Budgeted cash payment to suppliers in January. Clearly show your workings in

relation to purchases in relevant months.

$$102,000($see workings below$)$

From November purchases $$8,000=$$$80,00010\%$

From December purchases $$54,000=$$$80,000(1-10\%)[\frac{60\%}{60\%+20\%}]$

From January purchases $,$$$40,000=$$$200,00020\%$

$$102,000($why december purchases is $54000,$ i cannot understand.$)$