Metro, Inc. sells backpacks. The Company's accountant is preparing the purchases budget for the first quarter operations. Metro maintains ending inventory at 20% of the following month's expected cost of goods sold. Expected cost of goods sold for April is $70,000. All purchases are made on account with 25% of accounts paid in the month of purchase and the remaining 75% paid in the month following the month of purchase. Sales January February March
Budgeted cost of goods sold $40,000 $50,000 $60,000
Plus: Desired ending inventory 10,000
Inventory needed 50,000
Less: Beginning inventory (8,000)
Required purchases $42,000
1. Based on this information the total cash paid in March to settle accounts payable is:.
a. $39,000.
b. $15,500.
c. $62,000.
d. $54,500.
2. The amount of accounts payable appearing on the March 31 pro forma balance sheet is:.
a. $15,500.
b. $46,500.
c. $62,000.
d. none of the answers is correct.