Question

Constant Cleaning has $400,000 of net credit purchases and $20,000 of average

accounts payable. What is their average payment period?

Answer 1

The average payment period for Constant Cleaning is 18.25 days, calculated by dividing average accounts payable by net credit purchases and multiplying by 365.

Step-by-step explanation:

The question is asking for the calculation of the average payment period for Constant Cleaning, based on its net credit purchases and average accounts payable. To find the average payment period, we divide the average accounts payable by the total net credit purchases and then multiply by 365 days to convert it to days:

Average Payment Period = (Average Accounts Payable / Net Credit Purchases) × 365 days

Therefore, for Constant Cleaning:

Average Payment Period = ($20,000 / $400,000) × 365 days

Average Payment Period = 0.05 × 365 days

Average Payment Period = 18.25 days

The average payment period for Constant Cleaning is 18.25 days.