Question

Assuming a 365-day year, Barry Bees, Inc.'s Cost of Goods Sold equals $10,000.

A) Its Beginning Accounts Payable was $800, and its Ending Accounts Payable was $1,200.
B) Barry Bee's average number of days payables are outstanding equals days (rounded to the nearest full day).

Answer 1

44 days

Step-by-step explanation:

Given: Number of days outstanding= 365
`\ days`

Ending Accounts payable=
`\$ 1200`

Cost of goods sold (COGS)=
`\$ 10000`

We always consider ending account payable amount while calculating days payable outstanding (DPO), as it is the amount that is payable to the vendor, supplier, etc. at the end of the period.

Formula;
`\textrm Days\ payable\ outstanding (DPO) = (Account\ payable * number\ of days)/(Cost\ of\ goods\ sold)`

Days payable outstanding (DPO)=
`(1200* 365)/(10000) = 43.8` ≅
`44 \ days`

∴ Barry bee´s average number of days payable outstanding are 44 days.

Days payable outstanding are calculated to know how company is managing the cash flow and account payable. Company with higher DPO takes higher number of days to pay it´s creditor, vendor, etc.