A company's accounts payable total $360,960. If the company takes 60 days to pay its outstanding accounts, what is the value of the company's annual credit purchases?

Question

Quizplus · Accepted Answer

The value of the company's annual credit purchases can be calculated by first determining its daily purchases (accounts payable / days to pay = daily purchases) and then multiplying by 365 days. Given accounts payable of $360,960 and a 60-day payment period, the daily purchases are $360,960 / 60 = $6,016. Annual credit purchases are then $6,016 * 365 = $2,195,840.

A Company's Accounts Payable Total $360,960