Question

Hinkle Corporation buys on terms of 2/15, net 60 days. It does not take discounts, and it typically pays on time, 60 days after the invoice date. Net purchases amount to $550,000 per year. On average, what is the dollar amount of total trade credit (costly free) the firm receives during the year, i.e., what are its average accounts payable

Answer 1

Answer: $90,411

Explanation:

Average Accounts payable = Net Purchases * Average collection period / 365

Average collection period is 60 days

Net Purchases as stated is $550,000

Average accounts payable = 550,000 * 60 / 365

= 90,410.9589

= $90,411