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Wright Inc. has forecasted the following quarterly sales amounts for the upcoming year: Q1 = $746;...

Wright Inc. has forecasted the following quarterly sales amounts for the upcoming year:

Q1 = $746; Q2 = $686; Q3 = $907; Q4 = $808

Wright’s purchases from suppliers in a quarter are equal to 70% of the next quarter's forecasted sales. The payables period is 60 days. Wages, taxes, and other expenses are 17% of sales, and interest and dividends are $62 per quarter. No capital expenditures are planned.

Sales in Q1 of the following year are expected to be 933. What are Wright’s cash disbursements in the first quarter?

Solutions

Expert Solution

Particulars Q1 Q2 Q3 Q4 Q5
Sales             746            686            907            808            933
Less: Purchases @ 70% of Next Quarter             480            635            566            653
Less: Wages, Taxes, Other Expense @ 17%             127            117            154            137
Less: Interest & Dividend               62               62               62               62
EBT               77           -128            125             -44
Cash Disbursement
Particulars Amount
1. Payment to Creditors (480/3 Months) $ 160 is due by end of Q1             160
2. Wages Taxes and other expenses are due in the same month and have to be paid accordingly             127
3. Interst and Divided               62
Total Cash Disbursement             349

jeff jeffy answered 3 years ago
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