LeokLee Industries Has an Average Accounts Payable Balance of $720,000

question 31

Multiple Choice

LeokLee Industries has an average accounts payable balance of $720,000.Its average annual cost of goods sold is $8,760,000.It receives terms of 1/10 net 30 from its suppliers.Is LeokLee 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.
• E)No,since it,on average,does not make payment before it is due.

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Definitions:

Exchange Rates

The rate at which one currency can be exchanged for another currency.

Capital Assets (Net)

The total value of a business's long-term assets, including property, plant, and equipment, net of accumulated depreciation.

Functional Currency

The main currency used by a business entity to conduct its economic activities and financial reporting.

Acquisition Differential

The difference between the cost of an acquisition and the fair value of the net identifiable assets of the acquired entity.