Perfect Purchase Electronics Selected Income Statement Items, 2009
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000
Perfect Purchase Electronics
Selected Balance Sheet Accounts
12/31/2009 12/31/2008 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000
Using the information provided, what is the accounts payable turnover for the firm?
A) 15 times
B) 60 times
C) 75 times
D) 90 times

Question

Quizplus · Accepted Answer

Accounts payable turnover = Total purchases / Average accounts payable
We don't know the total purchases, but we do know COGS, which is related to purchases. We can assume that purchases are roughly equal to COGS.
Therefore, accounts payable turnover = COGS / Average accounts payable
Average accounts payable = (Beginning accounts payable + Ending accounts payable) / 2
Average accounts payable = ($90,000 + $110,000) / 2 = $100,000
Accounts payable turnover = $6,000,000 / $100,000 = 60 times.