Question

Problem 26-7 Calculating Payments Rossdale Products has projected the following sales for the coming year: Q1 Q2 Q3 Q4 Sales $ 740 $ 665 $ 785 $ 890

Sales in the year following this one are projected to be 15 percent greater in each quarter. The company places orders during each quarter equal to 30 percent of projected sales for the next quarter.

a. Calculate payments to suppliers assuming that the company pays immediately. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b. Calculate payments to suppliers assuming a 90-day payables period. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

c. Calculate payments to suppliers assuming a 60-day payables period. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Answer 1

Answer : (a.) Payment to supplier immediately :

Below is the table showing sales and Payment to supplier

	Quarter 1	Quarter 2	Quater 3	Quarter 4	Quarter 1 next year
Sales	740	665	785	890	851(740 * 1.15)
Payment to supplier (30% of next quarter sales)	199.5(665*30%)	235.5(785 * 30%)	267 (890*30%)	255.3(851 * 30%)

(b.) Calculatyion of Payment if supplier payable period is 90 days :

Given that Payment period is 90 days , Payment will be 30% of current quarter sales.

	Quarter 1	Quarter 2	Quater 3	Quarter 4
Sales	740	665	785	890
Payment to supplier (30% of next quarter sales)	222(740*30%)	199.5(665 * 30%)	235.5 (785*30%)	267(890 * 30%)

(c.)  Calculatyion of Payment if supplier payable period is 60 days :

Given that Payment period is 60 days , Payment will be 1 / 3rd of 30% of next quarter sales and 2/3rd of 30% of Current quarter sales

	Quarter 1	Quarter 2	Quater 3	Quarter 4	Quarter 1 next year
Sales	740	665	785	890	851(740 * 1.15)
Payment to supplier (30% of next quarter sales)	214.5[(665*30% * 1/3)+(740*30%*2/3)]	211.5[(785*30% * 1/3)+(665*30%*2/3)]	246[(890*30% * 1/3)+(785*30%*2/3)])	263.1[(851*30% * 1/3)+(890*30%*2/3)]