Rustic Furniture Co. is owned and operated by Cam Pfeifer. The following is an excerpt from a conversation between Cam
Cam: Mitzi, I've got a question about this recent balance sheet.
Mitzi: Sure, what's your question?
Cam: Well, as you know, I'm applying for a bank loan to finance our new store in Garden Grove, and I noticed that the accounts payable are listed as $320,000.
Mitzi: That's right. Approximately $275,000 of that represents amounts due our suppliers, and the remainder is miscellaneous payables to creditors for utilities, office equipment, supplies, etc.
Cam: That's what I thought. But as you know, we normally receive a 2% discount from our suppliers for earlier payment, and we always try to take the discount.
Mitzi: That's right. I can't remember the last time we missed a discount.
Cam: 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 $314,500, rather than $320,000. Every little bit helps. You never know. It might make the difference between getting the loan and not.
How would you respond to Cam Pfeifer's request?
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
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Chapter # 5
Section: Cases & Projects
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Question Posted: February 28, 2014 08:05:59