Explore BrainMass

Explore BrainMass

    Calculate the average accounts payable for APP Corporation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40. APP always takes the discount but takes the full 15 days to pay its bills. What is the average accounts payable for APP?

    © BrainMass Inc. brainmass.com June 4, 2020, 2:27 am ad1c9bdddf

    Solution Preview

    If $500,000 is purchased every single day, and if the company pays every invoice on the fifteenth day, there will always be 15 days of bills outstanding at any point in time. $500,000 x 15 days = $7,500,000. This is called the gross method of recording purchasing transactions.

    One might ask whether the 2% ...

    Solution Summary

    The 207 word cited solution explains the two difference methods of recording and reporting the accounts payable amount, and also provides the calculations for both methods.