Question

The Wire House purchases its inventory one quarter prior to the quarter of sale. The purchase price is 65 percent of the sales price. The accounts payable period is 45 days. The accounts payable balance at the beginning of Quarter 1 is $29,000. What is the amount of the expected disbursements for Quarter 2 given the following expected quarterly sales?Quarter 1: $26,000Quarter 2: $32,000Quarter 3: $39,100Quarter 4: $46,100a. $33,500b. $20,100c. $23,108d. $21,500e. $26,600

Answer 1

Answer:

e. 26.600

Explanation:

In order to identify the level of disbursements done in 2nd Quarter is essential to calculate the inventory level needed to fulfil with sales. If we say the initial payables at Q1 = Initial inventory at Q1, and Inventory/0,65 = potential Sales, then we will know how many inventories will leftover for the next Quarter (by subtracting projected sales of Q2). Repeating the operation for the 3rd Quarter (because purchases are made in advance), and taking into account that payables will be disbursed twice each Quarter, we will get that by the finish of the 2nd Quarter the disbursements will be of 26.600