Rustic Furniture Co. is owned and operated by Cam Pfeifer. The following is an excerpt...
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Accounting
Rustic Furniture Co. is owned and operated by Cam Pfeifer. The following is an excerpt from a conversation between Cam Pfeifer and Mitzi Wheeler, the chief accountant for Rustic Furniture Co:
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 to suppliers as
$314,500 rather than $320,000. Every little bit helps. You never know. It might make
the difference between getting and not getting the loan.
Please discuss how would you respond to Cam Pfeifer's request.
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