Question

The Torrey Pine Corporation’s purchases from suppliers in a quarter are equal to 80 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 20 percent of sales, and interest and dividends are $80 per quarter. No capital expenditures are planned.

Projected quarterly sales are shown here:

	Q1			Q2			Q3			Q4
Sales	$	2,280		$	2,580		$	2,280		$	1,980

Sales for the first quarter of the following year are projected at $2,610. 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

Payment of accounts = (Current quarter sales x 80% x 60 / 90) + (next quarter sales x 80% x 30 / 90)

Wages, taxes, other expenses = 20% x current quarter sales

Particulars	Q1	Q2	Q3	Q4
Sales	$2280	$2580	$2280	$1980
Payment of accounts	($2280 x 80% x 60/ 90) + ($2580 x 80% x 30/ 90) = $1904	($2580 x 80% x 60/ 90) + ($2280 x 80% x 30/ 90) = $1984	($2280 x 80% x 60/ 90) + ($1980 x 80% x 30/ 90) = $1744	($1980 x 80% x 60/ 90) + ($2610 x 80% x 30/ 90) = $1752
Wages, taxes, other expenses	20% x $2280 = $456	20% x $2580 = $516	20% x $2280 = $456	20% x $1980 = $396
Long - term financing expenses	$80	$80	$80	$80
Total	$2440	$2580	$2280	$2228