Question

Gifts For All has projected sales for next year of: Q1 Q2 Q3 Q4 Sales $ 26,600 $ 28,800 $ 35,800 $ 43,100 Purchases are equal to 57 percent of next quarter's sales. Each month has 30 days, the accounts receivable period is 34 days, and the accounts payable period is 37 days. How much will the company pay suppliers in the third quarter?

Answer 1

Answer :

We are given that,

Each month has 30 days

So, for three quarters it is 90 days

Purchases are equal to 57% of next quarter's sales

Now,

Payment to suppliers for Q2 purchase = ( Q2 sales * Purchase percentage of next quarter sales / 90 days )*Account payable period (or) 37 days

= ( 28,800 * 57% / 90 ) * 37

= $ 6,748.80

Payment to suppliers for Q3 = ( Q3 sales * Purchase percentage of next quarter sales / 90 days ) * Account payable period (or) ( 90 days - 37 days )

= ( 35,800 * 57% / 90 ) * 53

= $ 12,016.87

Therefore,

Payment in 3rd quarter = $ 6,748.80 + $ 12,016.87

Payment in 3rd quarter = $ 18,765.67 (or) 18,766