Question

A company reports Cost of Goods Sold of​ $420,000, Ending Inventory of​ $52,000, Beginning Inventory of​ $50,000, Ending Accounts Payable of​ $51,000 and Beginning Accounts Payable of​ $35,000. What is the​ days' payable​ outstanding? (Round any intermediary calculations to two decimal places and your final answer to the nearest​ day.)

A. 13.33 days
B. 23.08 days
C. 31.75 days
D. 45.00 days

Answer 1

The days' payable outstanding is calculated by dividing the average accounts payable by the daily cost of goods sold. For the supplied figures, the DPO is approximately 37 days, which does not match any of the provided answer choices.

Step-by-step explanation:

To calculate the days' payable outstanding (DPO), you'll need to determine the average accounts payable and the cost of goods sold per day. The average accounts payable is calculated by adding the beginning accounts payable to the ending accounts payable and dividing by two. The cost of goods sold per day is the cost of goods sold divided by the number of days in the period (typically 365 days for a year). Once you have these two figures, divide the average accounts payable by the cost of goods sold per day to find the DPO.

First, let's calculate the average accounts payable:
(Average Accounts Payable) = (Beginning Accounts Payable + Ending Accounts Payable) / 2
= ($35,000 + $51,000) / 2
= $86,000 / 2
= $43,000

Next, we calculate the daily cost of goods sold:
(Cost of Goods Sold per Day) = Cost of Goods Sold / Number of Days
= $420,000 / 365
= $1151.37

Finally, we find the DPO by dividing the average accounts payable by the daily cost of goods sold:
(DPO) = (Average Accounts Payable) / (Cost of Goods Sold per Day)
= $43,000 / $1151.37
= 37.35 days

Rounded to the nearest day, the company's days' payable outstanding is approximately 37 days. None of the options A, B, C, or D provided in the question matches the calculated DPO.