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Q. 20-24E

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Financial & Managerial Accounting
Found in: Page 920
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Walker Company prepares monthly budgets. The current budget plans for a September ending merchandise inventory of 30,000 units. Company policy is to end each month with merchandise inventory equal to 15% of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. The company budgets sales of 200,000 units in October. Prepare the merchandise purchases budgets for the months of July, August, and September.

The total number of units to be purchased in the month of July, August and September by Walker Company are 200,250 units, 308,250 units and 259,500 units.

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Step by Step Solution

Introduction

The total number of units to be purchased will be calculated using the beginning and ending inventory.

Preparation of the merchandise purchases budgets

Walker Company

Merchandise purchase budget

For the month of July, August and September

Particulars

July

August

September

Budgeted ending inventory

47,250

40,500

30,000

Add: Budgeted units of sales

180,000

315,000

270,000

Required units of available inventory

227,250

355,500

300,000

Less: Beginning inventory

27,000

47,250

40,500

Units to be purchased

200,250

308,250

259,500

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