Question

Merchandise Inventory increased $ 28 comma 000 and Accounts Payable decreased $ 19 comma 600 during the year. Accounts Payable relates only to the acquisition of merchandise inventory. Sales were $ 795 comma 500 and Cost of Goods Sold was $ 549 comma 500. Compute the payment made to the suppliers for inventory.

Answer 1

To compute the payment to suppliers for inventory, add the increase in Merchandise Inventory to the Cost of Goods Sold, and then subtract the decrease in Accounts Payable. The payment to suppliers for inventory is $538,300.

Step-by-step explanation:

The student is asking to calculate the payment made to suppliers for inventory during the year. To find this, we consider three factors: the increase in Merchandise Inventory, the decrease in Accounts Payable, and the Cost of Goods Sold (COGS).

First, we know Merchandise Inventory increased by $28,000. This increase is part of our total goods available for sale. Secondly, Accounts Payable decreased by $19,600; this represents cash payments made to suppliers since Accounts Payable decreases when a company pays off its creditors. Finally, we are given the Cost of Goods Sold, which is $549,500.

To calculate the payments made to suppliers, we need to add the increase in merchandise to the COGS, and then subtract the reduction in Accounts Payable:

Payments to suppliers = (Increase in Merchandise Inventory + Cost of Goods Sold) - Decrease in Accounts Payable

Payments to suppliers = ($28,000 + $549,500) - $19,600 = $557,900 - $19,600 = $538,300.

Therefore, the company made payments totaling $538,300 to suppliers for inventory during the year.