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

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Definitions:

Total Collection Time

The average period it takes for a business to receive payments owed by its customers.

Debit Card Transactions

Electronic fund transfers initiated by using a debit card, allowing the cardholder to withdraw cash or make purchases directly from their bank account.

Total Collection Time

The complete duration taken to collect payments owed by customers after a sale has been made.

Billing Electronically

The process of sending bills or invoices to customers through electronic means, such as email or online platforms, rather than paper mail.