You are provided the following information about McPherson Inc.:
Purchases by quarter for 2018 were

• Accounts payable at the beginning of the 1st quarter was $204,000. McPherson gets
60 days to pay from its suppliers.
• Assume purchases and payments occur evenly over each quarter and payments are made on the date they are due.

a. How much cash will McPherson pay its suppliers in each quarter of 2018 and for the entire year of 2018?
b. Suppose McPherson was notified by its suppliers in 2017 that for all purchases made after December 31, 2017, payment would have to be received by the supplier within 30 days of delivery. How much would McPherson pay in each quarter and for the entire year of 2018? (Assume beginning accounts payable is $204,000. This amount would be subject to the 2017 credit terms and would be payable over 60 days.)
c. Explain any differences between the amount paid in a. and b. above.
d. Suppose in 2019 purchases per quarter were exactly the same as in 2018. What amount would be paid to suppliers in 2019? Why is the amount paid in 2019 different from2018?

  • CreatedFebruary 26, 2015
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