Birds Unlimited has a 45 day trade payables 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 trade payables 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 £2,400. Therefore, COGS for Quarter 2 is £2,400 * 0.65 = £1,560. The trade payables period is 45 days, which is 1/8 of a year (45/360). Therefore, the cash disbursement for Quarter 2 is £1,560 * 1/8 = £1,462.50.

Birds Unlimited Has a 45 Day Trade Payables Period