Joseph Schmidt and Co. has the following estimated sales. Purchases are equal to 64 percent of the following quarter's sales. What is the cash outlay for accounts payable for quarter three if the firm has a 30 day accounts payable period? Assume each month has 30 days.

Question

Joseph Schmidt and Co. has the following estimated sales.  Purchases are equal to 64 percent of the following quarter's sales. What is the cash outlay for accounts payable for quarter three if the firm has a 30 day accounts payable period? Assume each month has 30 days.

Quizplus · Accepted Answer

Step 1: Calculate estimated sales for Q3 
Q2 sales = $220,000 
Q2 purchases = 64% of Q3 sales 
Therefore, Q3 sales = Q2 purchases / 64% = $206,250.

Step 2: Calculate accounts payable for Q3 
AP = Purchases x AP period 
AP period = 30 days 
Q3 purchases = Q3 sales x 64% = $131,400 
AP = $131,400 x (30 / 365) = $10,539.

Therefore, the cash outlay for accounts payable for quarter three is $10,539.