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 18 percent of sales, and interest and dividends are $60 per quarter. No capital expenditures are planned.
Projected quarterly sales are shown here:
Q1 Q2 Q3 Q4
Sales $680 $830 $800 $710
Sales for the first quarter of the following year are projected at $870. Calculate the company's cash outlays by completing the following (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)):
Q1 Q2 Q3 Q4
Payment of accounts $ $ $ $
(there is more to this problem but the payment of accoutns in the only thing im having trouble with. Just cant figure it out.)
To calculate the payment of accounts for each quarter, we need to determine the purchases from suppliers for each quarter. Given that the purchases are equal to 75% of the next quarter's forecast sales, we can calculate the purchases as follows:
Q1 purchases = 75% of Q2 forecast sales = 0.75 * $830 = $622.50
Q2 purchases = 75% of Q3 forecast sales = 0.75 * $800 = $600.00
Q3 purchases = 75% of Q4 forecast sales = 0.75 * $710 = $532.50
Now, let's calculate the payment of accounts for each quarter:
Q1 payment of accounts = Q1 purchases + Q2 purchases = $622.50 + $600.00 = $1222.50
Q2 payment of accounts = Q2 purchases + Q3 purchases = $600.00 + $532.50 = $1132.50
Q3 payment of accounts = Q3 purchases + Q4 purchases = $532.50 + 0 = $532.50 (There are no purchases in Q4 since the sales for Q4 are the last available data)
Q4 payment of accounts = Q4 purchases + Q1 of the following year purchases (Q1 of the following year sales = $870) = 0 + 75% of Q1 of the following year sales = 0 + 0.75 * $870 = $652.50
Therefore, the company's cash outlays for payment of accounts are as follows:
Q1: $1222.50
Q2: $1132.50
Q3: $532.50
Q4: $652.50
To calculate the payment of accounts for each quarter, we need to determine the amount of purchases from suppliers and the payables period.
Given:
Sales for Q1 = $680
Sales for Q2 = $830
Sales for Q3 = $800
Sales for Q4 = $710
Payables period = 60 days (2 months)
To find the purchases from suppliers for each quarter, we'll use the given information that purchases in a quarter are equal to 75% of the next quarter's forecast sales.
Purchases for Q1 = 75% of Q2 sales
Purchases for Q2 = 75% of Q3 sales
Purchases for Q3 = 75% of Q4 sales
Purchases for Q4 = 75% of Q1 sales (for the following year)
Let's calculate the purchases from suppliers for each quarter:
Purchases for Q1 = 75% of Q2 sales = 0.75 * $830 = $622.50
Purchases for Q2 = 75% of Q3 sales = 0.75 * $800 = $600.00
Purchases for Q3 = 75% of Q4 sales = 0.75 * $710 = $532.50
Purchases for Q4 (following year) = 75% of Q1 sales = 0.75 * $870 = $652.50
Now that we have the amount of purchases for each quarter, let's calculate the payment of accounts by multiplying the purchases by the payables period of 60 days (2 months) and dividing by 30 to convert it to months:
Payment of accounts for Q1 = Purchases for Q1 * Payables period / 30 = $622.50 * 60 / 30 = $1245.00 / 30 = $41.50
Payment of accounts for Q2 = Purchases for Q2 * Payables period / 30 = $600.00 * 60 / 30 = $1200.00 / 30 = $40.00
Payment of accounts for Q3 = Purchases for Q3 * Payables period / 30 = $532.50 * 60 / 30 = $1065.00 / 30 = $35.50
Payment of accounts for Q4 = Purchases for Q4 (following year) * Payables period / 30 = $652.50 * 60 / 30 = $1305.00 / 30 = $43.50
Therefore, the payment of accounts for each quarter is:
Payment of accounts for Q1 = $41.50
Payment of accounts for Q2 = $40.00
Payment of accounts for Q3 = $35.50
Payment of accounts for Q4 = $43.50