Question

Vivian Books buys books and magazines directly from publishers and distributes them to grocery stores. The wholesaler expects to purchase the following inventory.

April May June
Required purchases (on account) $ 113,000 $ 133,000 $ 145,000
Vivian Booksâs accountant prepared the following schedule of cash payments for inventory purchases. Vivian Booksâs suppliers require that 90 percent of purchases on account be paid in the month of purchase; the remaining10 percent are paid in the month following the month of purchase.

Required
a.
Complete the schedule of cash payments for inventory purchases by filling in the missing amounts.

Schedule of cash payments for inventory
April May June
Payment for current accounts payable $107,350
Payment for previous accounts payable 14,000
Total budgeted payments for inventory $121,350
b.
Determine the amount of accounts payable the company will report on its pro forma balance sheet at the end of the second quarter.

Answer 1

The schedule of cash payments for inventory purchases is completed by calculating the payment for current accounts payable and payment for previous accounts payable for each month. The amounts are calculated using the given percentage of 90% for the month of purchase and 10% for the month following the month of purchase.

Step-by-step explanation:

To complete the schedule of cash payments for inventory purchases, we need to calculate the amount of payment for current accounts payable and payment for previous accounts payable for each month.

For April, 90% of the required purchase of $113,000 is paid in the month of purchase, which is $113,000 * 90% = $101,700. The remaining 10% of the purchase is paid in the month following the month of purchase, which is $113,000 * 10% = $11,300. Therefore, the payment for current accounts payable in April is $101,700 and the payment for previous accounts payable is $11,300.

Following the same calculation, in May, the payment for current accounts payable is $119,700 and the payment for previous accounts payable is $13,300. In June, the payment for current accounts payable is $130,500 and the payment for previous accounts payable is $14,500.

Therefore, the schedule of cash payments for inventory purchases is as follows:

AprilMayJune$101,700$119,700$130,500$11,300$13,300$14,500$113,000$133,000$145,000

Answer 2

a.

April ; = 101700

May ; 11300 + 119700 = 131000

June ; 13300 + 130500 = 143800

b.

Account Payable which Vivian will report in pro forma balance sheet at the end of second quarter will be 14500.

Step-by-step explanation:

a. In the month of April Vivian made a purchase of $113000, of which 90% payment it has to pay in the month of purchase which is April so the amount which will be paid in the month of April is 101700 (113000 * 90/100)

For the month of May the amount needs to be paid will be 10% of purchases made in April and 90% of purchases made in May. So the total amount payable in May will be 131000 [( 113000 * 10/100) + (133000 * 90/100)].

The amount payable in the month of June will be 143800 [(133000 * 10/100) + (145000 * 90/100)]. This is made from 10% of purchases made in May and 90% amount of purchases made in June.

b. The amount to reported in pro forma balance sheet at the end of second quarter is 14500 ( 145000 * 10/100). This amount is computed by taking 10% of the purchases made in the month of June. The rest payments would have been already paid by the end of second quarter which is the end of month of June.