Kantorovich Company normally takes 30 days to pay for its average daily credit purchases of $2,000. It has average daily sales of $3,000, and collects accounts in 25 days. What is its net credit position?
A) $15,000
B) $1,000
C) ($1,000)
D) ($15,000)

Question

Quizplus · Accepted Answer

Net credit position = Accounts receivable − Accounts payable
Accounts receivable = Avg. daily credit sales × Avg. collection period
$75,000 = $3,000 × 25 days
Accounts payable = Avg. daily credit purchases × Avg. payment period
$60,000 = $2,000 × 30 days
Net credit position = $75,000 − $60,000 = $15,000;
Kantorovich is therefore a "net provider of trade credit."

Kantorovich Company Normally Takes 30 Days to Pay for Its