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What is the forecasted amount of total cash payments

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It is November 1 of Year 1. Sales for a decorative supplies company for November, December, and January (of Year 2) are forecasted to be as follows:

November: $200,000
December: $800,000
January: $200,000

  • On average, the cost of goods sold is 70% of sales. During this period, the company expects inventory levels to remain constant. This means that inventory purchases are expected to equal the amount of cost of goods sold.
  • 100% of purchases are on credit. Of the credit purchases, 5% are paid during the month of the purchase, 65% in the month following the purchase, and 30% in the second month following the purchase.
  • Sales for September and October of Year 1 were $100,000 and $150,000, respectively.

problem 1: What is the forecasted amount of total cash payments for purchases in January?

Reference no: EM132785337

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