Question
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A firm has an average accounts payable of $72,451.00, with COGS reported at $811,334.00 for the...
A firm has an average accounts payable of $72,451.00, with COGS reported at $811,334.00 for the past year.
A supplier has offered the firm a large discount if they can reduce days payable to 7 days. What would be the average accounts payable if they take this discount?
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Expert Solution
| Days Payable outstanding | = | Average accounts Payable/(Cost of goods sold/Number of days) | |||||||||
| = | $ 72,451 | / | (811334/365) | ||||||||
| = | $ 72,451 | / | $ 2,223 | ||||||||
| = | 33 | Days | |||||||||
| Reduced Days Payable | = | 7 Days | |||||||||
| Revised days payable | = | Average accounts Payable/(Cost of goods sold/Number of days) | |||||||||
| 7 | = | Average accounts Payable/ | (811334/365) | ||||||||
| 7 | = | Average accounts Payable/ | $ 2,223 | ||||||||
| 7 | = | Average accounts Payable/ | $ 2,223 | ||||||||
| Average accounts Payable | = | $ 15,560 | |||||||||
| Thus, Average accounts Payable if they take discount is | $ 15,560 | ||||||||||
| Note: | |||||||||||
| a. | Number of days in a year is taken as 365 | ||||||||||
| b. | There may be approximation difference due to runding off. | ||||||||||
jeff jeffy answered 2 years agoRelated Solutions
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