Question

Original Auto Parts has the following estimated sales. Purchases are equal to 70 percent of the following quarter's sales. The accounts payable period is 60 days.

Sales
q1-15900
q2-16800
q3-17500
q4-16400
Assume there are 30 days in each month. How much will the firm owe its suppliers at the end of the quarter :__________
a) $3,718
b) $3,967
c) $5,502
d) $7,653
e) $8,933

Answer 1

d) $7,653

Step-by-step explanation:

the quesiton is missing which quarter it refers to, but I will assume it is quarter 3 since I was able to match an answer:

average purchases = $16,400 x 70% = $11,480

accounts payable period = 60 / (3 x 30) = 60 / 90 = 2/3

approximate debt of the firm at the end of quarter 3 = $11,480 x 2/3 = $7,653.33