11BP_a McGriff Dog Food Company normall... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 3: 11BP_a (page 250)

McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of $9,530. Its average daily sales are $10,680, and it collects accounts in 32 days.
a. What is its net credit position? That is, compute its accounts receivable and accounts payable and subtract the latter from the former.
Accounts receivable = Average daily credit sales X Average collection period
Accounts payable = Average daily credit purchases X Average payment period

Short Answer

Expert verified

The net credit position is 84,450.

Step by step solution

Information provided in the question

Average credit purchases = $9,530

Average payment period = 27 days

Average daily sales = $10,680

Average collection period = 32 days

Calculation of accounts receivables

The accounts receivables is $341,760.

$\begin{array}{rcl} Accounts receivables & = & Average daily credit sales 脳 Average collection period \\ = & $ 10, 680 脳 32 days \\ = & $ 341, 760 \end{array}$

Calculation of accounts payable

The accounts payable is $257,310.

$\begin{array}{rcl} Accounts payable & = & Average daily credit purchase 脳 Average payment period \\ = & $ 9, 530 脳 27 days \\ = & $ 257, 310 \end{array}$

Calculation of net credit position

The net credit position is $84,450.

$\begin{array}{rcl} Net credit position & = & Accounts receivables - Accounts payable \\ = & $ 341, 760 - $ 257, 310 \\ = & $ 84, 450 \end{array}$

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January	\(100,000
February	\)93,000
March	\(25,000
April	\)25,000
May	\(20,000
June	\)35,000
July	\(45,000
August	\)45,000
September	\(55,000
October	\)85,000
November	\(105,000
December	\)123,000
Total annual sales	\(756,000

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Short Answer

Step by step solution

Information provided in the question

Calculation of accounts receivables

Calculation of accounts payable

Calculation of net credit position

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