Question: The Laurel Co is owned and operated by Paul Laurel

The Laurel Co. is owned and operated by Paul Laurel. The following is an excerpt from a conversation between Paul Laurel and Maria Fuller, the chief accountant for Laurel Co.
Paul: Maria, I’ve got a question about this recent balance sheet.
Maria: Sure, what’s your question?
Paul: Well, as you know, I’m applying for a bank loan to finance our new store in Clinton, and I noticed that the accounts payable are listed as $180,000.
Maria: That’s right. Approximately $150,000 of that represents amounts due our suppliers, and the remainder is miscellaneous payables to creditors for utilities, office equipment, supplies, etc.
Paul: That’s what I thought. But we normally receive a 2% discount from our suppliers for earlier payment, and we always try to take the discount.
Maria: That’s right. I can’t remember the last time we missed a discount.
Paul: Well, in that case, it seems to me the accounts payable should be listed minus the 2% discount. Let’s list the accounts payable due suppliers as $147,000, rather than $150,000. Every little bit helps. You never know. It might make the difference between getting the loan and not.

How would you respond to Paul Laurel’s request?

  • CreatedFebruary 04, 2014
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