Birds Unlimited has a 45 day accounts payable period. The ﬁrm has expected sales of $1,800, $2,100, $2,400 and $2,800, respectively, by quarter for the next calendar year. The cost of goods
Sold for a quarter is equal to 65% of the next quarter sales. What is the amount of the projected
Cash disbursements for accounts payable for Quarter 2 of the next year? Assume that a year has
360 days.

Question

Quizplus · Accepted Answer

First, we need to calculate the cost of goods sold for each quarter:

Q1 cost of goods sold = 65% x $2,100 = $1,365
Q2 cost of goods sold = 65% x $2,400 = $1,560

Next, we need to determine the total accounts payable for Q2. This will be the cost of goods sold for Q1, since the payable period is 45 days and Q1 occurs 45 days before Q2. So:

Total accounts payable for Q2 = $1,365

Finally, we need to adjust for the expected sales for Q2. Since Birds Unlimited has a payable period of 45 days, we only need to consider the sales occurring in the 45 days after Q2. So:

Expected sales for Q3 = $2,400
Expected sales for Q4 = $2,800

So the total sales during the payable period for Q2 are $2,400 + $2,800 = $5,200. Multiplying this by 65% gives a cost of goods sold of $3,380.

Therefore, the projected cash disbursements for accounts payable for Q2 are:

Total accounts payable for Q2 + cost of goods sold for Q2 = $1,365 + $3,380 = $4,745

Rounding to the nearest cent, the answer is $1,462.50.

Birds Unlimited Has a 45 Day Accounts Payable Period