Average accounts payable cycle. Use the following account information for Rian C

Question

Average accounts payable cycle. Use the following account information for Rian Company 2013 and 2014 Selected Balance Sheet Accounts of Rian Company 12/31/14 $38,000 $55,000 $27,000 12/31/13 $46,000 $59,000 Change $8,000 $4,000 Accounts receivable Accounts payable 25,000 $2,000 2014 Selected Income Statement Items for Rian Company Cash sales Credit sales Total sales Cost of ooods sold $570.000 What would the ending balance in the accounts payable account for 2014 have needed to be to reach this target (holding all other accounts he same)? $298,000 $672,000 $970,000 (Round to the nearest dollar)

Explanation / Answer

Solution :- Accounts payable cycle = 365 / Accounts payable turnover.

15 = 365 / Accounts payable turnover.

Accounts payable turnover = 365 / 15 = 24.333 Days.

Accounts payable turnover = Cost of goods sold / Average accounts payable

24.333 = 570000 / Average accounts payable

Average accounts payable = 570000 / 24.333

Average accounts payable = $ 23424.98

Average accounts payable = (Beginning accounts payable + Ending accounts payable) / 2

23424.98 = (25000 + Ending accounts payable) / 2

46849.96 = 25000 + Ending accounts payable

Ending accounts payable = 46849.96 - 25000

Ending accounts payable = $ 21849.96 (Rounded off to $ 21850)

Conclusion :- Ending balance in accounts payable account for the year ended on Dec. 31, 2014 = $ 21850.

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