Question

The Torrey Pine Corporation’s purchases from suppliers in a quarter are equal to 70 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 15 percent of sales, and interest and dividends are $95 per quarter. No capital expenditures are planned. Projected quarterly sales are shown here: Q1 Q2 Q3 Q4 Sales $ 2,130 $ 2,430 $ 2,130 $ 1,830 Sales for the first quarter of the following year are projected at $2,460. 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

Payables each period = [2/3×(.70)×current sales] + [1/3×(.70)×next period sales]

Payables Q1 period = [2/3 x 0.7 x $2,130] + [1/3 x 0.70 x $2,430] = $994 + $567 = $1,561

Payables Q2 period = [2/3 x 0.7 x $2,430] + [1/3 x 0.70 x $2,130] = $1,134 + $497 = $1,631

Payables Q3 period = [2/3 x 0.7 x $2,130] + [1/3 x 0.70 x $1,830] = $994 + $427 = $1,421

Payables Q4 period = [2/3 x 0.7 x $1,830] + [1/3 x 0.70 x $2,460] = $854 + $574 = $1,428

	Q1	Q2	Q3	Q4
Payment of Accounts	$1,561	$1,631	$1,421	$1,428
Wages, taxes, other expenses(15% of sales)	$319.5	$364.5	$319.5	$274.5
Long-term financing expenses (interest and dividends)	$95	$95	$95	$95
Total	$1,975.5	$2,090.5	$1,835.5	$1,797.5