Weisbro and Sons purchase their inventory one quarter prior to the quarter of sa

Question

Weisbro and Sons purchase their inventory one quarter prior to the quarter of sale. The purchase price is 60 percent of the sales price. The accounts payable period is 60 days. The accounts payable balance at the beginning of quarter one is $27,000. What is the amount of the expected disbursements for quarter two given the following expected quarterly sales?

$43,800

$60,600

$68,600

$66,800

$65,200

Weisbro and Sons purchase their inventory one quarter prior to the quarter of sale. The purchase price is 60 percent of the sales price. The accounts payable period is 60 days. The accounts payable balance at the beginning of quarter one is $27,000. What is the amount of the expected disbursements for quarter two given the following expected quarterly sales?

Quarter 1: $73,000 Quarter 2: $114,000 Quarter 3: $106,000 Quarter 4: $115,000

Explanation / Answer

Cost of sales is 60% and it is purchased in prior sales quarter. it means 68400 costing inventory ( 60% of 114000) of quarter 2 is purchased in quarter 1, and 63600 costing inventory (60% of 106000) of quarter 3 is purchased in quarter 2. If we convert quarter in months then:

All purchases are paid after 60 days i.e. 2 months.

It means 2nd and 3rd month of quarter 1 and 1st month of quarter 2 is paid in quarter 2.

so total expected disbursements for quarter two = 22800 + 22800 + 21200 = 66800

*It is assumed that the purchase of inventory is constant through out each quarter.

particulars qtr 1 (1st month) qtr 1 (2nd month) qtr 1 (3rd month) qtr 2 (1st month) qtr 2 (2nd month) qtr 2 (3rd month) purchase 68400/3 68400/3 68400/3 63600/3 63600/3 63600/3 =22800 =22800 =22800 =21200 =21200 =21200

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