The following are budgeted data for the Bingham Corporation, a merchandising company: Assuming that the Bingham Corporation had inventory on hand of $70,000 (at cost) on January 1, the purchases for January (at cost) would be:
A)$180,000
B)$250,000
C)$263,000
D)$110,000

Question

The following are budgeted data for the Bingham Corporation, a merchandising company:  Assuming that the Bingham Corporation had inventory on hand of $70,000 (at cost) on January 1, the purchases for January (at cost) would be:
A)$180,000 
B)$250,000 
C)$263,000 
D)$110,000

Quizplus · Accepted Answer

Using the formula: Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory, we can solve for purchases:

Cost of Goods Sold = $1,002,000 
Beginning Inventory = $70,000 
Ending Inventory = ($82,000 + $100,000) = $182,000

$1,002,000 = $70,000 + Purchases - $182,000 
Purchases = $1,002,000 - $70,000 + $182,000 
Purchases = $1,114,000

However, we are only interested in purchases for January, so we need to subtract the purchases made in February and March:

Purchases for January = $1,114,000 - ($480,000 + $371,000) 
Purchases for January = $263,000

Therefore, the best choice is C, which represents the purchases for January at cost.

The Following Are Budgeted Data for the Bingham Corporation, a Merchandising