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Cash payments for inventory purchases

4. Information pertaining to Brenton Corporation's sales revenue is presented in the following table:
February March April

Cash Sales $160,000 $150,000 $120,000
Credit Sales 300,000 400,000 280,000
Total Sales $460,000 $550,000 $400,000

Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month are 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

Brenton's budgeted total cash payments in March for inventory purchases are

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In March we would pay 25% of the purchases of March and 75% of ...

Solution Summary

The solution explains how to calculate the cash payments for inventory purchases