a)
To determine: The amount of payments to suppliers of all the four quarters, when the company pays immediately.
Introduction:
Accounts payable period: It is a period that a company takes to pay its invoice from the creditors. It is also termed as a day’s payable period.
a)
Answer to Problem 8QP
The payable amount to suppliers of Quarter 1(Q1) is $237.
The payable amount to suppliers of Quarter 2(Q2) is $288.
The payable amount to suppliers of Quarter 3(Q3) is $264.
The payable amount to suppliers of Quarter 4(Q4) is $248.4.
Explanation of Solution
Given information:
The GP Company places its orders during each quarter at 30% of projected sales for the next quarter. The Sales of Q1 is $720, Sales of Q2 is $790, Sales of Q3 is $960, and Sales of Q4 is $880.
The formula to calculate the payment amount to the suppliers:
Compute the payable amount for each quarter:
Note: Since the company pays immediately, the payable period becomes zero.
Compute the payment amount to the suppliers of Quarter 1 (Q1):
Hence, the payment amount to the suppliers of Q1 is $237.
Compute the payment amount to the suppliers of Quarter 2 (Q2):
Hence, the payment amount to the suppliers of Q2 is $288.
Compute the payment amount to the suppliers of Quarter 3(Q3):
Hence, the payment amount to the suppliers of Q3 is $264.
Compute the payment amount to the suppliers of Quarter 4(Q4):
Hence, the payment amount to the suppliers of Q4 is $248.4.
b)
To determine: The amount of payments to suppliers of all the four quarters, when the payables period is 90 days.
Introduction:
Accounts payable period: It is a period that a company takes to pay its invoice from the creditors. It is also termed as a day’s payable period.
b)
Answer to Problem 8QP
The payable amount to suppliers of Quarter 1(Q1) is $216.
The payable amount to suppliers of Quarter 2(Q2) is $237.
The payable amount to suppliers of Quarter 3(Q3) is $288.
The payable amount to suppliers of Quarter 4(Q4) is $264.
Explanation of Solution
Given information:
The GP Company places its orders during each quarter at 30% of projected sales for the next quarter. The Sales of Q1 is $720, Sales of Q2 is $790, Sales of Q3 is $960, and Sales of Q4 is $880.
Compute the payable amount for each quarter:
Note: Since the payables period is 90 days, the payable amount will be 30% of the current year sales.
Compute the payment amount to the suppliers of Quarter 1 (Q1):
Hence, the payment amount to the suppliers of Q1 is $216.
Compute the payment amount to the suppliers of Quarter 2 (Q2):
Hence, the payment amount to the suppliers of Q2 is $237.
Compute the payment amount to the suppliers of Quarter 3(Q3):
Hence, the payment amount to the suppliers of Q3 is $288.
Compute the payment amount to the suppliers of Quarter 4(Q4):
Hence, the payment amount to the suppliers of Q4 is $264.
c)
To determine: The amount of payments to suppliers of all the four quarters, when the payables period is 60 days.
Introduction:
Accounts payable period: It is a period that a company takes to pay its invoice from the creditors. It is also termed as a day’s payable period.
c)
Answer to Problem 8QP
The payable amount to suppliers of Quarter 1(Q1) is $223.
The payable amount to suppliers of Quarter 2(Q2) is $254.
The payable amount to suppliers of Quarter 3(Q3) is $280.
The payable amount to suppliers of Quarter 4(Q4) is $200.84.
Explanation of Solution
Given information:
The GP Company places its orders during each quarter at 30% of projected sales for the next quarter. The Sales of Q1 is $720, Sales of Q2 is $790, Sales of Q3 is $960, and Sales of Q4 is $880.
Note: The payables period is 60 days, so the payment in every period will be two-third of current quarter’s orders plus the one-third of next quarter’s orders.
The formula to calculate the payable amount for each quarter:
Compute the payment amount to the suppliers of Quarter 1 (Q1):
Hence, the payment amount to the suppliers of Q1 is $223.
Compute the payment amount to the suppliers of Quarter 2 (Q2):
Hence, the payment amount to the suppliers of Q2 is $254.
Compute the payment amount to the suppliers of Quarter 3 (Q3):
Hence, the payment amount to the suppliers of Q3 is $280.
Compute the payment amount to the suppliers of Quarter 4 (Q4):
Hence, the payment amount to the suppliers of Q4 is $200.84.
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Chapter 16 Solutions
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