Question

Kellogg had the following information in its most recent balance sheets and income statements. Balance Sheet January 2, 2016 January 3, 2015 Cash and cash equivalents $251 $443 Accounts receivable, net of allowance for uncollectible accounts $1344 $1276 Inventories $1250 $1279 Total assets $15265 $15153 Accounts payable $1907 $1528 Income Statement 2016 2015 Sales $13525 $14580 Cost of sales $8844 $9517 Calculate the accounts payable turnover for Kellogg for 2016. Round your answer to three decimals places.

Answer 1

Accounts payable turnover formula = Total supply purchases / Average payables value

Where

Average payables value = {Beginning payables (2015) + Ending payable (2016)} / 2

Beginning payables (2015) = 1528

Ending payable (2016) = 1907

= (1907 + 1528 ) / 2

Average payables value = 1,718

Now let us compute the purchases (assuming there are no cash purchases and all are credit purchases)

Cost of sales = Opening inventory + Purchases - Ending inventory

For 2016 - opening inventory will be closing inventory of 2015 = 1279

Closing inventory = 1250

Cost of sales for 2016 is given = 8844

put all these into the formula above you get

8844 = 1279 + Purchases - 1250

Purchases = 8844+1250 - 1279

Supply Purchases = 8,815

Now

Accounts payable turnover formula = Total supply purchases / Average payables value

= 8,815 / 1,718

= 5.131

Accounts payable turnover = 5.131