Question

Weisbro and Sons purchase their inventory one quarter prior to the quarter of sale. The purchase price is 60 percent of the sales price. The accounts payable period is 60 days. The accounts payable balance at the beginning of quarter one is $27,000. What is the amount of the expected disbursements for quarter two given the following expected quarterly sales?

Quarter 1: $73,000

Quarter 2: $114,000

Quarter 3: $106,000

Quarter 4: $115,000

$66,800

$68,600

$43,800

$65,200

$60,600

Answer 1

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales	$73,000	$114,000	$106,000	$115,000
Inventory Cost (Sales x 0.6)	43,800	68,400	63,600	69,000
Inventory to purchase	68,400	63,600	69,000	-
Accounts payable in same quarter	22,800	21,200	23,000	-
Accounts payable balance	27,000	45,600	42,400	46,000
Total accounts payable	$49,800	$66,800	$65,400	$46,000

Accounts payable period of the company is 60 days. Hence 1/3 of the purchases is paid in same quarter and 2/3 is paid in next quarter.

Expected disbursement in quarter 2 = 2/3 x $ 68,400 + 1/3 x $ 63,600

                                                         = $ 45,600 + $ 21,200

                                                         = $ 66,800

Hence option “$ 66,800” is correct answer.