Question

Suppose that 2013 business sales is $1,650,000 and COGS is 530,000. In 2014, the business owner...

Suppose that 2013 business sales is $1,650,000 and COGS is 530,000. In 2014, the business owner expects that sales will increase by 13% and COGS will be proportional to sales at the same rate as in 2013. Accounts Payable in 2013 is $16,500. In 2014, no change in AP days is expected.

1a) Find the value of COGS in 2014.

1b) Find the $ value of Accounts Payable in 2014.

Business   Accounting   
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Answer #1

Answer:

COGS in 2014 = $ 609500

Accounts Payable in 2014 = $ 18969.64

Working:

COGS Working:
Particulars 2013 2014
Sales 1650000 1897500
(1650000*1.15)
COGS 530000 609500
(530000*1.15) (as COGS is proportional to sales)
Account Payable Working:
Particulars Amount
Account Payable in 2013 16500
AP Days in 2013                               11.36
(Accounts Payable/COGS)*Number of days in a year (16500/530000*365)
AP Days in 2014 11.36
(same as in 2013)
Accounts Payable in 2014                      18,969.64
(11.36/365*609500)
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