Cash Management Practice Assessment 1 Task 3 Part C -HELP!!

jtsebina1

The companh pays its suppliers on the basis 25% one after purchase,40% two months after the date of purchase and 35% 3 months after the date of purchase

at the end of period 3 the tradepayables is forecast to be

Balance from period 1 =30135
balance from period 2 =66900
balance from period 3= 92400
Trade payables at the end of period 3 = 189435

identify the value of trade payables at the end of period 3 that will be paid in period 4 and 5

For period 4 the answer is 88915
for period 5 the answer is 68180

can someone please explain how the answers are worked out.

zippi

Hi jtsebina1,

Paid in:
P1 are figs from p2. (25%), p3. (40%) and p4. (35%). Now from p1 you know that there is only 35% left to pay in P4 therefore balance from period 1 is £30,135 i.e 35%
P2 are figs from p3. (25%), p4. (40%) and p5. (35%) From p2 you know that there is p4 and p5 left to pay which equals to 75% i.e. Balance from period 2 of £66900 is 75% so to convert to100% you need to £66900 x 100/75= £89,200 and 40% of this is paid in p4 therefore £35680 I.e (40%) paid in p4
P3 are figs from p4. (25%), p5. (40%) and p6. (35%) now balance from p3 is 25% paid in p4.i.e. £23100 if you add all these figs you get £88915 I.e. (30135 +35680+23100)
P4 are figs from p5. (25%), p6. (40%) and p7 (35%)
P5 are figs from p6. (25%). p7. (40%) and p8. (35%)

Same applies for period 5 .

hope this helps.