E14-7 Naftel Company sells lamps and other lighting fixtures

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E14-7 Naftel Company sells lamps and other lighting fixtures. The purchasing department manager
prepared the following inventory purchases budget. Naftel’s policy is to maintain an ending
inventory balance equal to 10 percent of the following month’s cost of goods sold. April’s
budgeted cost of goods sold is $75,000.

January February March
Budgeted cost of goods sold $50,000 $54,000 $60,000
Plus: Desired ending inventory 5,400 ? ?
Inventory needed 55,400 ? ?
Less: Beginning inventory 5,000 ? ?
Required purchases (on account) $50,400 ? ?

Required

a. Complete the inventory purchases budget by filling in the missing amounts.

b. Determine the amount of cost of goods sold the company will report on its first quarter pro
forma income statement.

c. Determine the amount of ending inventory the company will report on its pro forma balance
sheet at the end of the first quarter.