Question

The Giscome Corporation's purchases from suppliers in a quarter are equal to 75 percent of the next quarter's forecost sales. The payables period is 60 days Wages, taxes, and other expenses are 20 percent of sales, and intorest and dividends are $90 per quirtor No capital expenditures are planned Projected quarterly sales are shown bere Q2 03 $1,970 $2315 $1.930 $1.740 Q1 04 Sales Sales tor the first quarter of the following year are peojected at $2,380 Calculate the company's cash outlays by completng the folowing (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Q1 Q2 Q3 04 Payment of accounts Wages, taxes, other expenses Long-term Binancing expenses (interost and dividends) Total

Answer 1

60 day payable period means current quarter payable will be (60)/90 = 2/3 of current quarter sales is to be paid in current month while remaining 1/3 of next quarter sales is to be paid in this month

Since 75% of purchases are made

Payables each period = 2/3(0.75) times current sales + 1/3(0.75) next period sales

Q1 = 2/3*0.75*1970+1/3*0.75*2315 =1564

Q2 =2/3*0.75*2315+1/3*0.75*1930 =1640

Q3=2/3*0.75*1930+1/3*0.75*1740 =1400

Q4=2/3*0.75*1740+1/3*0.75*2380 =1465

А F 1 Purchases 2 Payable period 3 Wages, taxes, other expenses 4 Long term financing expenses 5 Next year Q1 sales Tal B D E 75% next quarters forecast sales 60 days 20% Sales 90 per Quarter 2380 102 103 104 la 1970 2315 1930 1740 1564 1640 1400 1465 394 463 386 348 90 90 90 90 2048 2193 1876 1903 2380 7 Sales 8 Payment of accounts 9 Wages, taxes, other expenses 10 Long term financing expenses 11 Total 12 13 Curent quarter payment 14 Next Quarter payment 0.666667 0.333333

1 Purchases 2 Payable period 3 Wages, taxes, other expenses 4 Long term financing expenses 5 Next year Q1 sales 90 6 0.75 next quarters forecast sales 60 days 0.2 Sales per Quarter 2380 Q1 Q2 1970 2315 =($B$13*B7+$B$14*07)*$B$1 1=($B$13*C7+$B$14*D7) *$B$1 =$B$3*B7 =$B$3*C7 =$B$4 =$B$4 =SUM(B8:B10) =SUM(C8:010) 03 Q1 =B5 Q4 1740 =($B$13*E7+$B$14*F7) *$B$1 =$B$3*E7 =$B$4 =SUM(E8:E10) 7 Sales 8 Payment of accounts 9 Wages, taxes, other expenses 10 Long term financing expenses 11 Total 12 13 Curent quarter payment 14 Next Quarter payment 15 16 1930 =($B$13*D7+$B$14*E7) *$B$1 =$B$3*D7 =$B$4 =SUM(D8:010) = 2/3 =1/3