Saddleback Company Paid Off $30,000 of Its Accounts Payable in Cash

question 109

Multiple Choice

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

• A)Assets, $30,000 increase; equity, $30,000 increase.
• B)Assets, $30,000 decrease; liabilities, $30,000 decrease.
• C)Assets, $30,000 decrease; liabilities, $30,000 increase.
• D)Liabilities, $30,000 decrease; equity, $30,000 increase.
• E)Assets, $30,000 decrease; equity $30,000 decreasE.Assets = Liabilities + Stockholders' Equity

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Definitions:

Cash Cycle

The period between the outlay of cash for purchases and the collection of cash from customers in a business.

Inventory Turnover

A ratio showing how many times a company has sold and replaced inventory over a period.

Accounts Payable Turnover

A financial ratio that measures the rate at which a company pays off its suppliers by comparing net purchases to average accounts payable during a period.

Accounts Receivable Period

The Accounts Receivable Period is the average number of days it takes for a business to receive payments from its customers for goods or services sold on credit.