Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Chapter D, Problem 13E
To determine

Concept Introduction:

Days Payable outstanding (DPO):

Days payable outstanding is the time in days which the company takes to pay off its accounts payable. Day's payable outstanding is calculated using the following formula:

  Days payable outstanding = Accounts Payable * 365Cost of Sales 

Requirement-1:

To Calculate:

Days Payable outstanding for Current Year

Expert Solution
Check Mark

Answer to Problem 13E

Days Payable outstanding for Current Year is 25

Explanation of Solution

Days Payable outstanding for Current Year is calculated as follows:

    $ MillionsCurrent Year
    Accounts Payable (A)
    $ 1,931
    Cost of Goods Sold (B)
    $ 28,164
    Days Payable Outstanding = (A*365/B)25
To determine

Concept Introduction:

Days Payable outstanding (DPO):

Days payable outstanding is the time in days which the company takes to pay off its accounts payable. Day's payable outstanding is calculated using the following formula:

  Days payable outstanding = Accounts Payable * 365Cost of Sales 

Requirement-2:

To Calculate:

Reduction in Days Payable outstanding if accounts payables are reduced by 8%

Expert Solution
Check Mark

Answer to Problem 13E

Reduction in Days Payable outstanding if accounts payables are reduced by 8% shall be 2 days

Explanation of Solution

Reduction in Days Payable outstanding if accounts payables are reduced by 8% is calculated as follows:

    Before Reduction in Accounts Payable:
    $ MillionsCurrent Year
    Accounts Payable (A)
    $ 1,931
    Cost of Goods Sold (B)
    $ 28,164
    Days Payable Outstanding = (A*365/B)25
    After Reduction in Accounts Payable:
    $ MillionsCurrent Year
    Accounts Payable (A) (1931*92%)
    $ 1,777
    Cost of Goods Sold (B)
    $ 28,164
    Days Payable Outstanding = (A*365/B)23
    Reduction in Days Payable Outstanding (25-23) 2
To determine

Concept Introduction:

Days Payable outstanding (DPO):

Days payable outstanding is the time in days which the company takes to pay off its accounts payable. Day's payable outstanding is calculated using the following formula:

  Days payable outstanding = Accounts Payable * 365Cost of Sales 

Requirement-3:

To Calculate:

Increase in Days Payable outstanding if accounts payables are increased by 8%

Expert Solution
Check Mark

Answer to Problem 13E

Increase in Days Payable outstanding if accounts payables are increased by 8% shall be 2 days

Explanation of Solution

Increase in Days Payable outstanding if accounts payables are increased by 8% is calculated as follows:

    Before Increase in Accounts Payable:
    $ MillionsCurrent Year
    Accounts Payable (A)
    $ 1,931
    Cost of Goods Sold (B)
    $ 28,164
    Days Payable Outstanding = (A*365/B)25
    After Increase in Accounts Payable:
    $ MillionsCurrent Year
    Accounts Payable (A) (1931*108%)
    $ 2,085
    Cost of Goods Sold (B)
    $ 28,164
    Days Payable Outstanding = (A*365/B)27
    Reduction in Days Payable Outstanding (27-25) 2

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