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ALPHA, Inc
ALPHA, Inc. sells all of its products on credit. Purchases are 60% of the sales for the following quarter. The firm uses a 365-day year and account averages where applicable in its computations.
The financial manager of the firm provides the following relevant information:
Accounts receivable period
37 days
Inventory period
51 days
Accounts payable period
42 days
Account
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Sales
$7,000
$6,000
$8,000
$9,000
Wages
$2,000
$1,500
$2,000
$2,500
Overhead expenses
$500
$400
$500
$600
Dividends
$125
$125
$125
$125
Interest expense
$350
$150
$200
$300
What is the accounts payable balance at the beginning of Quarter 2?
Expert Solution
Computation of Accounts Receivable Balance at the Beginning of Quarter 2:
Accounts Receivable Balance at the Beginning of Quarter 2 = Sales for Quarter 1 * Accounts Receivables Period / Days in a quarter
= 7000 * 37 / 90
Accounts Receivable Balance at the Beginning of Quarter 2 = $2,877.78
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