LeokLee Industries Has an Average Accounts Payable Balance of $720

question 87

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 payment due date.
• D)No, since it, on average, does not take advantage of the discount period and pays well before payment is due.

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Definitions:

Glass-Steagall Act

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The North American Free Trade Agreement, a treaty among the United States, Canada, and Mexico that aimed to eliminate trade barriers and facilitate the cross-border movement of goods and services.

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A peaceful and non-violent protest movement that led to the end of the communist regime in Czechoslovakia in 1989.

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The site in Beijing, China, of pro-democracy protests in 1989 that were violently suppressed by the Chinese government, resulting in numerous deaths and injuries.