The Thakor Corporation’s purchases from suppliers in a quarter are equal to 70 p

Question

The Thakor 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. Here are the projected quarterly sales: 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: Q1 Q2 Q3 Q4 Payment of accounts $ $ $ $ Wages, taxes, other expenses Long-term financing expenses (interest and dividends) Total

Explanation / Answer

Q1 Q2 Q3 Q4 Q1 next year Sales                2,220                       2,520            2,220             1,920    2,550 Purchases                1,764                       1,554            1,344             1,785 60 payable days means 1/3 paid in the qtr and 2/3 in next qtr Taxes and wages are assumed to be paid in the same qtr Cash Outlays Quarter Q1 Q2 Q3 Q4 Cash payment for purchase Q1                    588                       1,176 Cash payment for purchase Q2                           518            1,036 Cash payment for purchase Q3                448                 896 Cash payment for purchase Q4                 595 Total cash Payment for Purchase                    588                       1,694            1,484             1,491 Wages Taxes & Other expenses                    666                           756                666                 576 Dividend payment                      80                             80                  80                   80 Total cash Outlay $            1,334 $                   2,530 $        2,230 $         2,147

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