The Torrey Pine Corporation’s purchases from suppliers in a quarter are equal to

Question

The Torrey Pine Corporation’s purchases from suppliers in a quarter are equal to 70 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 30 percent of sales, and interest and dividends are $80 per quarter. No capital expenditures are planned. Projected quarterly sales are shown here: Q1 Q2 Q3 Q4 Sales $ 2,220 $ 2,520 $ 2,220 $ 1,920 Sales for the first quarter of the following year are projected at $2,550. Calculate the company’s cash outlays by completing the following (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.): Q1 Q2 Q3 Q4 Payment of accounts $ $ $ $ Wages, taxes, other expenses Long-term financing expenses (interest and dividends) Total $ $ $ $

Explanation / Answer

Calculations and explanations:

Payment of accounts = (60/90)*70%*current sales + (30/90)*70%*next quarter's sale

Thus payment of accounts for 1st quarter = (60/90)*70%*2220 + (30/90)*0.7*2520

= 1624.

Similary payment of accounts have been computed for the periods Q2, Q3 and Q4.

Wages, taxes and other expenses = 30% of sales. Thus for Q1 it is = 30% of 2220 = 660. Similarly it has been computed for other quarters.

Current year Next year Q1 Q2 Q3 Q4 Q1 Sales 2,220.00 2,520.00 2,220.00 1,920.00 2,550.00 Payment of accounts 1,624.00 1,694.00 1,484.00 1,491.00 Wages, taxes and other expenses 666.00 756.00 666.00 576.00 Long term financing 80.00 80.00 80.00 80.00 Total 2,370.00 2,530.00 2,230.00 2,147.00

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