Your Accountant Suspects a Mistake in the Computation of the Payables

question 1

Multiple Choice

Your accountant suspects a mistake in the computation of the payables period,which has been reported at 54.75 days.Calculate the correct payables period,given the following: annual sales = $1,200,000,annual cost of goods sold = $700,000,average accounts payable = $105,000.

• A) 31.94 days
• B) 54.75 days
• C) 179.58 days
• D) 212.92 days

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Definitions:

Return on Assets Ratio

A financial metric indicating how profitable a company is relative to its total assets, calculated by dividing net income by total assets.

Accruing Interest Expense

The process of recording interest expense that has been incurred but not yet paid in the financial statements.

Stockholders' Equity

The portion of a company's assets that can be claimed by its owners, equal to total assets minus total liabilities.

Current Assets

Assets that are expected to be converted into cash, sold, or used up within one year or within the normal operating cycle of the business, whichever is longer.