Kirk Development Buys on Terms of 2/15,net 60 Days

question 102

Multiple Choice

Kirk Development buys on terms of 2/15,net 60 days.It does not take discounts,and it typically pays on time,60 days after the invoice date.Net purchases amount to $475,000 per year.On average,what is the dollar amount of total trade credit (costly + free) the firm receives during the year,i.e. ,what are its average accounts payable? (Assume a 365-day year,and note that purchases are net of discounts. )

• A) $78,082
• B) $96,822
• C) $60,904
• D) $78,863
• E) $91,356

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Definitions:

IFRS

International Financial Reporting Standards; a set of accounting standards developed by the International Accounting Standards Board (IASB) that is used globally to prepare public company financial statements.

Contract Revenue

Revenue recognized by a company from contracts for the sale of goods or services, often recognized over the period of the contract based on the completion or delivery of services/goods.

IFRS

International Financial Reporting Standards are a set of accounting standards developed by the International Accounting Standards Board that are becoming the global standard for the preparation of public company financial statements.

Recoverable Costs

Expenditures that a company expects to recover in the future through tax deductions, reimbursements, or as contracts costs.