Question

Wright Inc. has forecasted the following quarterly sales amounts for the upcoming year:

Q1 = $770; Q2 = $691; Q3 = $887; Q4 = $800

Wright’s purchases from suppliers in a quarter are equal to 70% of the next quarter's forecasted sales. The payables period is 60 days. Wages, taxes, and other expenses are 17% of sales, and interest and dividends are $62 per quarter. No capital expenditures are planned. Sales in Q1 of the following year are expected to be 944. What are Wright’s cash disbursements in the fourth quarter?

Answer 1

Particulars. Q1 . Q2 . Q3. Q4 .

Sales . 770 . 691 . 887 . 800

Less: Purchases. 161.2 . 529.4. 600.6 . 593.59

-Wages& taxes. 130.9. 117.47. 150.8 . 136

-Int&dividend . 62 . 62. 62. 62

Cash disbur. 415.86. -17.902. 73.617 . 8.404

Cash disbursement in the fourth quarter is $8.404

Working notes:

Calculation of payment made to suppliers per quarter

Q1 = 483.7/3 = 161.2

Q2 = 483.7 ×2/3 + 620.9 × 1/3 = 529.4

Q3 = 620.9 × 2/3 + 560/3 = 600.6

Q4 = 560 × 2/3 + 660.8/3 = 593.59