{"id":42273,"date":"2025-06-28T17:59:21","date_gmt":"2025-06-28T17:59:21","guid":{"rendered":"https:\/\/gaviki.com\/blog\/?p=42273"},"modified":"2025-06-28T17:59:22","modified_gmt":"2025-06-28T17:59:22","slug":"pt-wastra-handicrafts-has-net-global-sales-of-usd423000-with-30-percent-of-it-being-credit-sales","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/pt-wastra-handicrafts-has-net-global-sales-of-usd423000-with-30-percent-of-it-being-credit-sales\/","title":{"rendered":"PT Wastra Handicrafts has net global sales of USD423,000 with 30 percent of it being credit sales"},"content":{"rendered":"\n<p><br>PT Wastra Handicrafts has net global sales of USD423,000 with 30 percent of it being credit sales. Its cost of goods sold is USD324,000. The firm&#8217;s cash conversion cycle is 47.9 days. The firm&#8217;s operating cycle is 86.3 days. What is the firm&#8217;s accounts payable? (Round to the nearest dollar)<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p>To determine the firm&#8217;s accounts payable, we will need to use the following formula for the <strong>cash conversion cycle (CCC)<\/strong>:CCC=Days&nbsp;Sales&nbsp;Outstanding&nbsp;(DSO)+Days&nbsp;Inventory&nbsp;Outstanding&nbsp;(DIO)\u2212Days&nbsp;Payables&nbsp;Outstanding&nbsp;(DPO)\\text{CCC} = \\text{Days Sales Outstanding (DSO)} + \\text{Days Inventory Outstanding (DIO)} &#8211; \\text{Days Payables Outstanding (DPO)}CCC=Days&nbsp;Sales&nbsp;Outstanding&nbsp;(DSO)+Days&nbsp;Inventory&nbsp;Outstanding&nbsp;(DIO)\u2212Days&nbsp;Payables&nbsp;Outstanding&nbsp;(DPO)<\/p>\n\n\n\n<p>We are given the following information:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Net global sales<\/strong> = USD 423,000<\/li>\n\n\n\n<li><strong>Credit sales<\/strong> = 30% of net global sales = 423,000\u00d70.30=126,900423,000 \\times 0.30 = 126,900423,000\u00d70.30=126,900<\/li>\n\n\n\n<li><strong>Cost of Goods Sold (COGS)<\/strong> = USD 324,000<\/li>\n\n\n\n<li><strong>Cash Conversion Cycle (CCC)<\/strong> = 47.9 days<\/li>\n\n\n\n<li><strong>Operating Cycle<\/strong> = 86.3 days<\/li>\n<\/ul>\n\n\n\n<p>From the operating cycle, we know that:Operating&nbsp;Cycle=Days&nbsp;Sales&nbsp;Outstanding&nbsp;(DSO)+Days&nbsp;Inventory&nbsp;Outstanding&nbsp;(DIO)\\text{Operating Cycle} = \\text{Days Sales Outstanding (DSO)} + \\text{Days Inventory Outstanding (DIO)}Operating&nbsp;Cycle=Days&nbsp;Sales&nbsp;Outstanding&nbsp;(DSO)+Days&nbsp;Inventory&nbsp;Outstanding&nbsp;(DIO)<\/p>\n\n\n\n<p>We can now rearrange the formula for <strong>CCC<\/strong> to solve for <strong>Days Payables Outstanding (DPO)<\/strong>:DPO=DSO+DIO\u2212CCC\\text{DPO} = \\text{DSO} + \\text{DIO} &#8211; \\text{CCC}DPO=DSO+DIO\u2212CCC<\/p>\n\n\n\n<p>We can find the DSO and DIO from the given values and COGS:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>DSO (Days Sales Outstanding)<\/strong>:<br>DSO measures how long it takes to collect credit sales. Using the formula: DSO=Accounts\u00a0ReceivableCredit\u00a0Sales\u00a0per\u00a0Day\\text{DSO} = \\frac{\\text{Accounts Receivable}}{\\text{Credit Sales per Day}}DSO=Credit\u00a0Sales\u00a0per\u00a0DayAccounts\u00a0Receivable\u200b Given that credit sales = 126,900, the daily credit sales would be: Daily\u00a0Credit\u00a0Sales=126,900365\u2248347.67\\text{Daily Credit Sales} = \\frac{126,900}{365} \\approx 347.67Daily\u00a0Credit\u00a0Sales=365126,900\u200b\u2248347.67 From the <strong>Operating Cycle<\/strong>: Operating\u00a0Cycle=86.3\u00a0days\\text{Operating Cycle} = 86.3 \\text{ days}Operating\u00a0Cycle=86.3\u00a0days Therefore: DSO=86.3\u00a0days\\text{DSO} = 86.3 \\text{ days}DSO=86.3\u00a0days<\/li>\n\n\n\n<li><strong>DIO (Days Inventory Outstanding)<\/strong>:<br>The DIO can be found by: DIO=InventoryCOGS\u00a0per\u00a0Day\\text{DIO} = \\frac{\\text{Inventory}}{\\text{COGS per Day}}DIO=COGS\u00a0per\u00a0DayInventory\u200b Given that the COGS = 324,000, the daily COGS would be: Daily\u00a0COGS=324,000365\u2248890.41\\text{Daily COGS} = \\frac{324,000}{365} \\approx 890.41Daily\u00a0COGS=365324,000\u200b\u2248890.41 Now, plugging values into the formula: Operating\u00a0Cycle=86.3\u00a0days\u21d2DIO=Operating\u00a0Cycle\u2212DSO=86.3\u221247.9\u224838.4\u00a0days\\text{Operating Cycle} = 86.3 \\text{ days} \\quad \\Rightarrow \\quad \\text{DIO} = \\text{Operating Cycle} &#8211; \\text{DSO} = 86.3 &#8211; 47.9 \\approx 38.4 \\text{ days}Operating\u00a0Cycle=86.3\u00a0days\u21d2DIO=Operating\u00a0Cycle\u2212DSO=86.3\u221247.9\u224838.4\u00a0days<\/li>\n\n\n\n<li><strong>Finding DPO (Days Payables Outstanding)<\/strong>: Now that we know DSO and DIO, we can use the formula for CCC to solve for DPO: DPO=47.9\u00a0days\u21d2DPO=47.9+38.4\u221247.9=38.4\u00a0days\\text{DPO} = 47.9 \\text{ days} \\quad \\Rightarrow \\quad \\text{DPO} = 47.9 + 38.4 &#8211; 47.9 = 38.4 \\text{ days}DPO=47.9\u00a0days\u21d2DPO=47.9+38.4\u221247.9=38.4\u00a0days<\/li>\n\n\n\n<li><strong>Accounts Payable<\/strong>: Finally, we can calculate the <strong>Accounts Payable<\/strong> using the formula: Accounts\u00a0Payable=DPO\u00d7COGS\u00a0per\u00a0Day\\text{Accounts Payable} = \\text{DPO} \\times \\text{COGS per Day}Accounts\u00a0Payable=DPO\u00d7COGS\u00a0per\u00a0Day Using the COGS per day of 890.41: Accounts\u00a0Payable=38.4\u00d7890.41\u224834,200\\text{Accounts Payable} = 38.4 \\times 890.41 \\approx 34,200Accounts\u00a0Payable=38.4\u00d7890.41\u224834,200<\/li>\n<\/ol>\n\n\n\n<p>So, the <strong>firm\u2019s accounts payable<\/strong> is approximately <strong>USD 34,200<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"1024\" src=\"https:\/\/gaviki.com\/blog\/wp-content\/uploads\/2025\/06\/learnexams-banner5-285.jpeg\" alt=\"\" class=\"wp-image-42274\" srcset=\"https:\/\/gaviki.com\/blog\/wp-content\/uploads\/2025\/06\/learnexams-banner5-285.jpeg 1024w, https:\/\/gaviki.com\/blog\/wp-content\/uploads\/2025\/06\/learnexams-banner5-285-300x300.jpeg 300w, https:\/\/gaviki.com\/blog\/wp-content\/uploads\/2025\/06\/learnexams-banner5-285-150x150.jpeg 150w, https:\/\/gaviki.com\/blog\/wp-content\/uploads\/2025\/06\/learnexams-banner5-285-768x768.jpeg 768w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>PT Wastra Handicrafts has net global sales of USD423,000 with 30 percent of it being credit sales. Its cost of goods sold is USD324,000. The firm&#8217;s cash conversion cycle is 47.9 days. The firm&#8217;s operating cycle is 86.3 days. What is the firm&#8217;s accounts payable? (Round to the nearest dollar) The Correct Answer and Explanation [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-42273","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/42273","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=42273"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/42273\/revisions"}],"predecessor-version":[{"id":42275,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/42273\/revisions\/42275"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=42273"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=42273"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=42273"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}