The Sepulcro Corporation’s purchases from suppliers in a quarter are equal to 80

Question

The Sepulcro Corporation’s purchases from suppliers in a quarter are equal to 80 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 35 percent of sales, and interest and dividends are $116 per quarter. No capital expenditures are planned. Projected quarterly sales are:
  

  
Sales for the first quarter of the following year are projected at $1,680.
  
Calculate the company’s cash outlays by completing the following: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Q1 Q2 Q3 Q4 Sales $1,560 $1,710 $1,770 $2,010

Explanation / Answer

Since the payables period is 60 days, payables in each period = 2/3 of last quarter’s orders, and1/3 of this quarter’s orders, or 2/3(0.80) times current sales + 1/3(0.80) next period sales.

Eg. Q1

2/3(.80) times current sales = 2/3(.80) * 1560 = 832

Add- 1/3(.80) times next period sales = 1/3(.80) * 1710 = 456

Total = 832 + 456 = 1288

Q1 Q2 Q3 Q4 Payment of accounts $1288 $ 1384 $ 1480 $ 1520 Wages, taxes, other expenses 546 598.5 619.5 703.5 Long-term financing expenses (interest and dividends) 116 116 116 116 Total $1950 $ 2098.5 $2215.5 $2339.50

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