Kirk Development Buys on Terms of 2/15,net 60 Days

question 115

Multiple Choice

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 $550,000 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)$ 90,411
• B)$ 94,932
• C)$ 99,678
• D)$104,662
• E)$109,895

---

Definitions:

Contractual Vertical

A system where independent firms at different levels of the production and distribution process work together through contractual relationships.

Supply Sources

Providers or vendors from which companies obtain their raw materials, products, or services.

Forward Integration

A business strategy where a company extends its operations by moving forward in the supply chain, acquiring or controlling the distribution centers or retailers.

Manufacturing Operation

A manufacturing operation involves the processes and activities related to the production of goods, typically on a large scale, incorporating human labor, machinery, and technology.