Question 3

- Sales: January = $520,000; February = $540,000; March = $550,000; April = $600,000;

May = $660,000; June = $670,000.

- Purchases: Purchases are calculated as 70% of the following months sales, 50% of purchases are made in cash, 30% of purchases are settled one month after purchase, and the remaining 20% of purchases are settled two months after purchase.

- Rent: The firm pays rent of $9,500 per month.

- Wages and salaries: The fixed wage and salary costs are $7,500 per month plus a variable cost of 6.5% of the current months sales.

- Taxes: The tax bill to be paid in May amounts to $57,500.

- Fixed asset outlays: New equipment will be acquired during March at a cost of $85,000.

- Interest payments: An amount of $32,000 for interest is due in March.

Cash dividends: Dividends of $15,000 will be paid in April.

As the chief financial officer of Galaxo Inc., you are provided with following information by accounting department. You are asked to prepare cash disbursements schedule for March, April and May.

a. Prepare a quarterly cash disbursements schedule for March, April and May. (4 Marks)