Question

The Selco Corporation’s purchases from suppliers in a quarter are equal to 65 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 25 percent of sales, and interest and dividends are $95 per quarter. No capital expenditures are planned. Projected quarterly sales are: Q1 Q2 Q3 Q4 Sales $2,370 $2,670 $2,370 $2,070 Sales for the first quarter of the following year are projected at $2,700. Calculate the company’s cash outlays by completing the following: (Do not round intermediate calculations and 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

		Q1	Q2	Q3	Q4
	Receive from Customers (Sales)	2370	2670	2370	2070
Less :	Paid to Supplier (Working Note attached below)	0	0	1735.5	1540.5
Less :	Wages Taxes and other expenses (25% of sales)	592.5	667.5	592.5	517.5
Less :	Interest and Dividends	95	95	95	95
	Total Cash Inflow / Outflow	1682.5	1907.5	-53	-83
	Working Note on Payment to Supplier	Q1	Q2	Q3	Q4	Q5
	Sales	2370	2670	2370	2070	2700
	Purchase (65% of next Quarter forecast)	1735.5	1540.5	1345.5	1755
	Money Payable (After 60 days from bill)	0	0	1735.5	1540.5

Note : Payable in Q1 and Q2 is also Zero and prior dues are not mentioned in question and hence assumed to be Zero.

Any alternative assumption can also be made.