Question

A company's Inventory balance at 12/31/16 was $188,000 and $200,000 at 12/31/15. Its Accounts Payable balance at 12/31/16 was $84,000 and $80,000 at 12/31/15, and its cost of goods sold for 2016 was $720,000. The company's total amount of cash payments for merchandise in 2016 equals:1) $728,000.2) $712,000.3) $704,000.4) $720,000.5) $736,000.

Answer 1

3) $704,000

Step-by-step explanation:

The procedure will be as follow:

Based on the company's inventory we will determinate the purchases.

And then, with the account payable balance, the cash payment

First, purchases amount:

beginning inventory + purchase = ending inventory + COGS

200,000 + purchase = 188,000 + 720,000

purchases = 720,000 + 188,000 - 200,000 = 708,000

Now, we solve for payment to suppliers

begging AP + purchase - payment = ending

80,000 + 708,000 - payment = 84,000

payment = 80,000 + 708,000 - 84,000

payment= 704,000