Question

Visions designs, markets, and distributes audio and gaming headphones, earbuds, and speakers. Assume that last year Visions reported cost of goods sold of $176 million. Assume that this year cost of goods sold was $135 million. Accounts payable was $33 million at the end of last year and $17 million at the end of this year. Required: 1. For this year, compute the average number of days that Visions’s accounts payable are outstanding. (Round your answer to the nearest whole number.)

Answer 1

Answer:

Payable days

= Accounts payable/Cost of goods sold x 365 days

= $17 million/$135 million x 365 days

= 46 days

Explanation:

Payable days could be calculated as the ratio of accounts payable and cost of goods sold multiplied by number of days in a year. Accounts payable in the current year is $17 million and cost of goods sold amounted to $135 million.

Answer 2

The average number of days that Visions’ accounts payable are outstanding is 68 days.

Firstly, we need to calculate the average accounts payable. This will be;

= ($33 million + $17 million) / 2

= $50 million / 2

= $25 million.

Then, the average number of days will be:

= Average account payable/Cost of good sold × 365

= (25 million / 135 million) × 365

= 68 days.

In conclusion, the correct option is 68 days.

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