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.

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Definitions:

Sole Authority

Exclusive power or right to decide, direct, or manage something without needing approval or consent from others.

Partnership

is a legal form of business operation between two or more individuals who share management and profits.

Criminally Liable

The legal responsibility for a crime, implicating that an individual can be prosecuted and potentially convicted for their actions.

Partnership Agreement

A contract between partners in a business that outlines the terms of their partnership, such as distribution of profit and loss, and management duties.