Question

The Torrey Pine Corporation’s purchases from suppliers in a quarter are equal to 75 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 20 percent of sales, and interest and dividends are $90 per quarter. No capital expenditures are planned.

Projected quarterly sales are shown here:

	Q1			Q2			Q3			Q4
Sales	$	2,100		$	2,400		$	2,100		$	1,800

Sales for the first quarter of the following year are projected at $2,430. 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	$

Answer 1

Answer

• Payment to supplier is 60 days means that payment for one quarter is made within that quarter only.

	Q1	Q2	Q3	Q4
Payment of accounts	$1,800	$1,575	$1,350	$1,823
Wages, taxes, other expenses	$420	$480	$420	$360
Long-term financing expenses	$90	$90	$90	$90
(interest and dividends)
Total	$2,310	$2,145	$1,860	$2,273

--Working

	Q1	Q2	Q3	Q4
Payment of accounts	=2400*75%	=2100*75%	=1800*75%	=2430*75%
Wages, taxes, other expenses	=2100*20%	=2400*20%	=2100*20%	=1800*20%
Long-term financing expenses	90	90	90	90
(interest and dividends)