Using the information provided, what is the accounts payable turnover for the firm?
Perfect Purchase Electronics
Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000
Perfect Purchase Electronics
Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000
A) 15 times
B) 60 times
C) 75 times
D) 90 times
Answer: B
Explanation: B)
1. Average accounts payable = (beginning of year AP + end of year AP)/2
= ($110,000 + $90,000)/2
= $100,000
2. Accounts Payable Turnover = COGS/Average Accounts Payable
= $6,000,000/$100,000
= 60 times.
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