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Accounts Payable A chain of appliance stores, APP Corporation, purchases inventory with a net price of...

Accounts Payable

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $250,000 each day. The company purchases the inventory under the credit terms of 1/15, net 30. APP always takes the discount, but takes the full 15 days to pay its bills. What is the average accounts payable for APP? Round your answer to the nearest dollar.

Solutions

Expert Solution

The answer depends on whether APP uses gross method or net method to record accounts payable:

If gross method is used,

the average accounts payable = net price*days to pay the bill

=>250,000*15

=>3,750,000.

If net method is used,

the average accounts payable = net price *days to pay the bill * (1- discount)

=>250,000*15*(1-0.01)

=>3,712,500.

jeff jeffy answered 2 years ago
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