Kirk Development buys on terms of 2/15,net 60 days.It does not take discounts,and it typically pays on time,60 days after the invoice date.Net purchases amount to $650,000 per year.On average,what is the dollar amount of total trade credit (costly + free)the firm receives during the year,i.e. ,what are its average accounts payable? (Assume a 365-day year,and note that purchases are net of discounts. )
A) $106,849
B) $125,014
C) $117,534
D) $123,945
E) $107,918

Question

Quizplus · Accepted Answer

11ea856c_8b59_ed4d_9aec_05403df86f3f_TB1222_00 ?
Purchases/day = $650,000 / 365 = $1,781
Average trade credit = Average A/P = Days to payment 11ea856c_8b5a_145e_9aec_e790915c8970_TB1222_11 Net purchases/day = $106,849
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Kirk Development Buys on Terms of 2/15,net 60 Days