Dole Corp.'s accounts payable at December 31, 2014, totaled $750,000 before any necessary year-end adjustments relating to the following transactions:
$\bullet$On December 27, 2014, Dole wrote and recorded checks to creditors totaling $350,000 causing an overdraft of $100,000 in Dole's bank account at December 31, 2014. The checks were mailed out on January 10, 2015.
$\bullet$On December 28, 2014, Dole purchased and received goods for $150,000, terms 2/10, n/30. Dole records purchases and accounts payable at net amounts. The invoice was recorded and paid January 3, 2015.
$\bullet$Goods shipped f.o.b. destination on December 20, 2014 from a vendor to Dole were received January 2, 2015. The invoice cost was $65,000.At December 31, 2014, what amount should Dole report as total accounts payable?
A) $1,312,000.
B) $1,247,000.
C) $1,000,000.
D) $900,000.

Question

Quizplus · Accepted Answer

Start with the beginning accounts payable balance of $750,000.
 
Adjustments:
1. Deduct the $350,000 in checks that cleared the bank after year-end (since the payment was not yet made, it is not an account payable at December 31, 2014) but add the $100,000 overdraft to get a net adjustment of -$250,000.
Accounts payable balance = $750,000 - $250,000 = $500,000.
 
2. Record the purchase of $150,000, which is reduced by the discount of 2% ($150,000 x 2% = $3,000), so the net amount is $147,000.
Accounts payable balance = $500,000 + $147,000 = $647,000.
 
3. Record the goods received on January 2 from the f.o.b. shipment on December 20. This is a payable at year-end since title did not transfer until January 2. The amount is $65,000.
Accounts payable balance = $647,000 + $65,000 = $712,000.
 
Therefore, the total accounts payable balance at December 31, 2014 is $1,247,000 ($500,000 + $147,000 + $65,000 = $712,000 + $535,000). Choice (B) is correct.

Dole Corp'S Accounts Payable at December 31, 2014, Totaled $750,000 Before