Question

Weisbro and Sons purchase their inventory one quarter prior to the quarter of sale. The purchase...

Weisbro and Sons purchase their inventory one quarter prior to the quarter of sale. The purchase price is 60 percent of the sales price. The accounts payable period is 60 days. The accounts payable balance at the beginning of quarter one is $27,000. What is the amount of the expected disbursements for quarter two given the following expected quarterly sales?
Quarter 1: $73,000
Quarter 2: $114,000
Quarter 3: $106,000
Quarter 4: $115,000

a.$66,800

b.$68,600

c. $43,800

d. $65,200

e. $60,600

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Answer #1

Answer : Correct Option is a.$66800

Explanation:

Calculation of Amount of Disbursement in Quarter two

Given that Weisbro and Sons purchase their inventory one quarter prior to the quarter of sale.

Amount of Inventory to be purchased in Quarter 2 = $106,000 * 60%

= $63600

Amount of Inventory to be purchased in Quarter 1 = $114,000 * 60%

= $68400

Given Accounts payable period is 60 days and in a quarter there are 90 days therefore 1/3rd of the amount of the creditors will be paid in the same month in the month of Purchase and 2/3rd will be paid in the next quarter

Therefore

Amount of Purchase which is required to be paid in current quarter

= 63600 * 1/3rd = 21200

Amount of Purchase which is required to be paid in current quarter of previous quarter purchase

= 68400 * 2/3rd = 45600

Total Amount of the expected disbursements for quarter two is $66,800 (21200 + 45600)

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