In 2015, XYZ Corp. had an annual cost of goods sold of $365 million. XYZ'saverage accounts receivable balance in 2015 was $35 million, and theiraverage accounts payable balance was $10 million. The terms that XYZreceives on trade credit from its suppliers are 3/20, net 30. Is XYZmanaging its accounts payable well? Why/why not?No, because they are paying their suppliers too lateNo, because they are paying their suppliers too earlyYes, because they are strategically stretching their bills past the due dateYes, because they are paying their suppliers on the last day to get the discount

Answer: Option . No, because they are paying their suppliers too early. Explanation.Days Purchase…

Answered: In 2015, XYZ Corp. had an annual cost…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 13P

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In 2015, XYZ Corp. had an annual cost of goods sold of $365 million. XYZ’s average accounts receivable balance in 2015 was $35 million, and their average accounts payable balance was $10 million. The terms that XYZ receives on trade credit from its suppliers are 3/20, net 30. Is XYZ managing its accounts payable well? Why/why not? No, because they are paying their suppliers too late Yes, because they are paying their suppliers on the last day to get the discount Yes, because they are strategically stretching their bills past the due date No, because they are paying their suppliers too early
Fedex Ltd is a manufacturer that makes all sales on a 30-day credit terms. Annual sales are approximately $65 million. At the end of 2014 accounts receivable were presented in the company’s Balance Sheet as below: Accounts Receivable $5,350,000 Less: Allowance for Doubtful accounts $90,000 During 2015, $740,000 in accounts receivable were written off as uncollectible. Of these amounts written off, receivables totalling $34,000 were unexpectedly collected. At the end of 2015, an ageing of accounts receivable indicated a need for an $80,000 allowance to cover possible failure to collect the accounts currently outstanding. Fedex Ltd makes adjusting entries in its accounting records only at year-end. Required: Explain the difference between making an allowance for bad debts and writing off bad debt. Explain how each case is treated and shown in accounting. Prepare one journal entry to summarize…
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Last year, Pastis Productions reported $100,000 in sales and $40,000 in cost of goods sold. Thecompany estimates it would have doubled its sales and cost of goods sold had it allowed customersto buy on credit, but it also would have incurred $50,000 in additional expenses relating to wages,bad debts, and interest. Should Pastis Productions extend credit?
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