Weisbro and Sons purchases its inventory one quarter prior to the quarter of sale.The purchase price is 60% of the sales price.The accounts payable period is 60 days.The accounts payable balance at the beginning of quarter one is $27,500.What is the amount of the expected disbursements for quarter two given the following expected quarterly sales? Assume that a year has 360 days. Quarter 1 $\quad \$ 31,000$
Quarter $2 \quad \$ 34,000$
Quarter $3 \quad \$ 42,000$
Quarter $4 \quad \$ 51,000$

Question

Quizplus · Accepted Answer

To find the expected disbursements for quarter two, we need to first find the cost of goods sold (COGS) for quarter two.
COGS for quarter two = Inventory purchased in quarter one = 60% of expected sales revenue in quarter two = 0.6 x $34,000 = $20,400
Now, we need to find the accounts payable balance at the end of quarter one after paying for the inventory purchased in quarter one.
Accounts payable balance at the end of quarter one = Accounts payable balance at the beginning of quarter one + Purchases in quarter one - Payments in quarter one
Payments in quarter one = Purchases in quarter one x Accounts payable period / Number of days in quarter = 0.6 x $31,000 x 60 / 90 = $12,400
Accounts payable balance at the end of quarter one = $27,500 + 0.6 x $31,000 - $12,400 = $46,700
Finally, we can find the expected disbursements for quarter two by using the following formula:
Expected disbursements for quarter two = COGS for quarter two x Accounts payable period / Number of days in quarter = $20,400 x 60 / 91 = $13,400 (rounded to nearest hundred)
Therefore, the best choice is C, $22,000, as it is the closest answer option to $13,400.

Weisbro and Sons Purchases Its Inventory One Quarter Prior to the Quarter