Question

Assume a merchandising company's estimated sales for January. February, and March are $112,000,$132,000, and $122,000, respectively. Its cost of goods sold is always 60% of its sales. The company always maintains ending merchandise inventory equal to 30% of next month's cost of goods sold. It pays for 20% of its merchandise purchases in the month of the purchase and the remaining 80% in the subsequent month. What is the accounts payable balance at the end of February? Multiple Cholce $56,640 $15,480 $57,760 $61,920

Answer 1

The accounts payable balance at the end of February is $63,360.

Step-by-step explanation:

To calculate the accounts payable balance at the end of February, we need to first determine the cost of goods sold for February. The cost of goods sold is always 60% of the sales, so for February it would be: $132,000 imes 0.60 = $79,200.

Next, we calculate the ending merchandise inventory for March, which is 30% of the cost of goods sold for March. Since we know the estimated sales for March is $122,000, the cost of goods sold for March would be $122,000 imes 0.60 = $73,200. Therefore, the ending merchandise inventory for March would be $73,200 imes 0.30 = $21,960.

Finally, we can calculate the accounts payable balance at the end of February. The company pays for 20% of its merchandise purchases in the month of purchase, so the accounts payable balance at the end of February would be 80% of the cost of goods sold for February: $79,200 imes 0.80 = $63,360.

Answer 2

The accounts payable balance at the end of February for a merchandising company, given the cost of goods sold and inventory requirements, is $61,920.

Step-by-step explanation:

To determine the accounts payable balance at the end of February for the merchandising company, we must first calculate the cost of goods sold (COGS) for each month and then the ending merchandise inventory that the company maintains. Afterward, we can calculate the merchandise purchases for February and what part of these purchases is unpaid by the end of February.

• January COGS = 60% of $112,000 = $67,200
• February COGS = 60% of $132,000 = $79,200
• March COGS = 60% of $122,000 = $73,200

The ending inventory for January, which is 30% of February's COGS, is 30% of $79,200 = $23,760.

The purchases for February are the sum of February COGS plus March's ending inventory minus January's ending inventory. So, February Purchases = $79,200 + ($73,200 * 30%) - $23,760 = $79,200 + $21,960 - $23,760 = $77,400.

The company pays for 20% of its purchases in the month of purchase and the rest in the following month. Therefore, for February, the company will still owe 80% of February purchases in March. February Accounts Payable = 80% of February Purchases = 80% of $77,400 = $61,920.