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

The cost of goods sold for Quarter 2 is 65% of Quarter 3 sales, which is 65% of $2,400 = $1,560. The accounts payable period is 45 days, which is 1/8 of a year (45/360). Therefore, the cash disbursement for Quarter 2 is 1/8 of the cost of goods sold for Quarter 3, which is $1,560 * 1/8 = $1,462.50.

Birds Unlimited Has a 45 Day Accounts Payable Period