Problem 4 Calculating Payments. Brunell Products has projected the following sal

Question

Problem 4 Calculating Payments. Brunell Products has projected the following sales for the coming year: Sales in the year following this one are projected to be 15 percent greater in each quarter. 0 01 Q2 Q3 Q4 Sales$680 $765 $915 $840 4 0 0 A. Calculate payments to suppliers assuming that the company places orders during each quarter equal to 30 percent of projected sales for the next quarter. Assume that the company pays immediately. What is the payables period in this case? 01 Q2 3 Q4 Payment of accounts 4 1. Rework part (a) assuming a 90-day payables period. 2. Rework part (a) assuming a 60-day payables period+

Explanation / Answer

Statement showing payment of trade payables

If there is 90 days payable period, payment in each period will be 30% of current period sales

If there is 60 days payable period, payment in each period will be 2/3 of last quarter's order and 1/3 of this quarter's order

Quarterly payments = 2/3*0.3(current sales) + 1/3*0.3(next period sales)

Particulars Q1 Q2 Q3 Q4 Q1 of following year Projected sales 680 765 915 840 782 Trade payable -30% of next quarter 229.5 274.5 252 234.6 Payment of above- immediatedly 229.5 274.5 252 234.6

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