[jlondon]

Here’s the question : I feel dumb.. cuz I know this is simple af… but I think I’m blanking out..where do I start??

In preparing its cash budget for July 2012, Reed Company made the following projections:

Sales $1,500,000

Gross profit (based on sales) 25%

Decrease in inventories $70,000

Decrease in accounts payable for inventories $120,000

For July 2012 what were the estimated cash disbursements for inventories?

$935,000

$1,050,000

$1,055,000

$1,175,000 *** Right Answer

Explanation: This answer is correct. The solutions approach is to use T-accounts for inventory and accounts payable to find cash disbursements.

BEC: 69, 57, 72, 73, (anticipated for 4/4/2015)
AUD: 65, 63, 74, 84!!! (expires 7/31/2015)
FAR: 63, 57, (scheduled for 4/1/2015)
REG: ... 42, (Anticipated to be around 5/20~)

-Every Set Back is a Set Up for a Major Come Back #motivation

"I've missed over 9,000 shots in my career. I've lost over 300 games. 26 times I've been trusted to take the game winning shot, and missed. I've failed, over and over and over again in my life. And that is why, I succeed." - Michael Jordan

"You are not your past, but the resources and capabilities you glean from it" -Jordan Belfort

[Mayo]

“If you understand JEs and T accounts the explanation given makes perfect sense.”

Yeah, but you can insert anything in place of “JEs and T accounts” and it might not make sense to one person or another. For example, using the words “taxes” or “women” would make the statement false 😛

Seriously though, I think both ways are valid. I just took exception to the explanation, since saying “use T accounts” doesn't really explain how. Regardless, I love T accounts, and still use them in my job when an entry or account doesn't make sense to me.

Mayo, BBA, Macc

[Author]

Replies