On December 31st, Baxtor, Inc. has cost of goods sold of $310,000, ending inventory is $18,000, beginning inventory is $23,000; and average accounts payable is $89,000. What is the accounts payable turnover expressed as days?
A. 103
B. 121
C. 74
D. 106
Solution:
Accounts payable turnover in days = (Purchase / Average accounts payable) × 365
= 365/ ($305,000 / 89,000)
= 106 (option D)
workings: Purchase = COGS + End. Inventory - Beginning inventory
= $310,000 + 18,000 - 23,000
= $305,000
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My chosen answer is wrong. I
know I have to use the accounts payable turnover formula and the
turnover expressed in days formula. The formulas are:
Accounts payable turnover (T/O) = Purchases from suppliers
(assumed all on credit) ÷ Average accounts payable
Turnover expressed in days = 365 ÷ T/O (computed from the
formula above)
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