Gibson Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Gibson’s policy is to maintain an ending inventory balance equal to 15 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $77,000. Inventory Purchases Budget
January February March
Budgeted cost of goods sold $58,000 $62,000 $68,000
Plus: Desired ending inventory 6,200
Inventory needed 64,200
Less: Beginning inventory 5,800 (6,200) (6,800)
Required purchases (on
account) $58,400
1. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement.
2. Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter.
Required
A. Cost of goods sold $188,000
B. Ending inventory
1. Complete the inventory purchases budget by filling in the missing amounts.
2. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement.
3. Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter.