Sound Check, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 80% of sales. Its inventory policy calls for ending inventory in each month to equal 10% of the next month's budgeted cost of goods sold. All purchases are on credit, and 20% of the purchases in a month is paid for in the same month. Another 20% is paid for during the first month after purchase, and the remaining 60% is paid for in the second month after purchase. The following sales budgets are set: July, $300,000; August, $240,000; September, $270,000; October, $225,000; and November, $215,000.


(1) Compute the budgeted merchandise purchases for July, August, September, and October.

I don't even have any idea to start this question, Please help me to only calculate the July budgeted merchandise purchases.

There are several examples of this type of question in here. I'll give you a couple of links that were pretty detailed. I think reading them will help, and then if you'll come back with your attempt we can check it for you.

https://www.askmehelpdesk.com/accounting/budgeted-cash-disbursements-merchandise-purchases-580021.html

https://www.askmehelpdesk.com/accounting/merchandise-purchases-budget-accounting-575263.html

Same thing with this problem, Just help me to compute the budgeted merchandize purchase for only July, So I would be able to get an idea to find for other months. Thanks in advance for your help

You'll want to set up a spreadsheet with columns for July through November. List your sales for each, and COGS at 80%. 90% are purchased in the current and 10% of the following month are purchased in the current month.

For July, sales are $300,000. COGS at 80% would be $240,000. 10% would have been purchased in June. 90% are purchased in July (90% of $240,000 is $216,000). 10% of the August merchandise is purchased in July. Given this info, can you figure out that amount? That, added to the $216,000, is your budgeted purchases for July.

Thanks a lot, Another quick question, how you can compute the budgeted payments on accounts payable for September and October and what is the ending account payable for these months

Did you do a spreadsheet? Use this info from your question applied to your purchases budget: All purchases are on credit, and 20% of the purchases in a month is paid for in the same month. Another 20% is paid for during the first month after purchase, and the remaining 60% is paid for in the second month after purchase.

If you'll make an attempt, we'll check it for you. Trying to do the problem is going to teach you more than being given the solution. Try it, show your work, and that will help us see what you are not understanding. It may even help you with your other problem. I find that one a little harder because less info is given so I think you have to make assumptions. Thanks.