Preparing an inventory purchases budget and schedule of cash payments

Caine Inc. sells fireworks. The company’s marketing director developed the following cost of goods sold budget for April, May, June, and July.

April

May

June

July

Budgeted cost of goods sold

$70,000

$80,000

$90,000

$76,000

Caine had a beginning inventory balance of $3,500 on April 1 and a beginning balance in accounts payable of $15,100. The company desires to maintain an ending inventory balance equal to 10 percent of the next period’s cost of goods sold. Caine makes all purchases on account. The company pays 50 percent of accounts payable in the month of purchase and the remaining 50 percent in the month following purchase.

Required

a. Prepare an inventory purchases budget for April, May, and June.

b. Determine the amount of ending inventory Caine will report on the end of quarter pro forma balance sheet.

c. Prepare a schedule of cash payments for inventory for April, May, and June.

d. Determine the balance in accounts payable Caine will report on the end of quarter pro forma balance sheet.