Question

Hare, Inc., had a cost of goods sold of $45,021. At the end of the year, the accounts payable balance was $8,583. How long on average did it take the company to pay off its suppliers during the year

Answer 1

70 days

Step-by-step explanation:

For computing the number of days first we have to determine the credit turnover ratio which is shown below:

Credit turnover ratio is

= (Cost of Goods Sold ÷ Average accounts payable)

= ($45,021 ÷ $8,583)

= 5.245 times

Now the number of days is

= Total number of days in a year ÷ credit turnover ratio

= 365 ÷ 5.245

= 70 days