Bercraft Industries Has an Average Accounts Payable Balance of $280,000

question 47

Multiple Choice

Bercraft Industries has an average accounts payable balance of $280,000. Its average annual cost of goods sold is $4,780,000. It receives terms of 1/20 net 40 from its suppliers. Is Bercraft managing its accounts payables well?

• A) Yes, since it, on average, chooses not to take the discount, but pays when payment is due.
• B) Yes, since it, on average, takes the discount, and pays at the end of the discount period.
• C) Yes, since it, on average, stretches payment beyond the due payment date.
• D) No, since it, on average, does not take advantage of the discount period and pays well before payment is due.