70.2K

Verified Solution

Link Copied!

Problem 19-10 Forecasting Net Cash Flow (LO2)

Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the below table.

	Quarter in Coming Year					Following Year
	First	Second	Third	Fourth		First Quarter
Sales forecast	$420	$342	$346	$394		$394

On average, one-third of sales are collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that sales in the last quarter of the previous year were $346. Also, two thirds of the quarter's orders are paid for in the current quarter and the remainder is paid in the following quarter. Assuming that Paymores labor and administrative expenses are $75 per quarter and that interest on long-term debt is $50 per quarter, work out the net cash flow for Paymore for the coming year using the below table. (Do not round intermediate calculations.)

	Quarter First Second Third Fourth Sources of cash: Collections on accounts receivable Uses of cash: Payments of accounts payable Labor and administrative expenses Interest on long-term debt Total uses of cash Net cash inflow/(outflow)

Answer & Explanation Solved by verified expert

See Answer