Reference no: EM132637348

Kayapa Corporation is a retailer whose sales are all made on credit.

Sales are billed twice monthly, on the 10th of the month for the last half of the prior month's sales, and on the 20th of the month for the first half of the current month's sales. The terms of all sales are 2/10, net 30. Based upon past experience, the collection of accounts receivable is as follows: Within the discount period 80% On the 30th day 18% Uncollectible 2% Kayapa's average gross profit ratio is 20%. All sales and purchases occur uniformly throughout the month. The sales value of shipments for May and the forecasts for the next four months are as follows: May (actual) P500,000 June 600,000 July 700,000 August 700,000 September 400,000 Kayapa purchases merchandise for resale to meet the current month's sales demand and to maintain a desired monthly ending inventory of 25% of the next month's sales. All purchases are on credit with terms of net/30. Kayapa pays for 50% of a month's purchases in the month of purchase and 50% in the month following the purchase.

Problem 1: The budgeted peso value of Kayapa's inventory on August 31 will be?

a. P175,000
b. P140,000
c. P100,000
d. P80,000