Question

A company reported cost of goods sold of $1,760,000 for the year.

During the year, inventory increased from a $92,000 beginning balance to a $140,000 ending balance, and accounts payable increased from a $48,000 beginning balance to a $56,000 ending balance.

How much is the cash paid for merchandise purchased during the year?

a) $1,660,000

b) $1,800,000

c) $1,808,000

d) $1,704,000

Answer 1

Option (B) is correct.

Step-by-step explanation:

Given that,

cost of goods sold = $1,760,000

Beginning Inventory = $92,000

Ending Inventory = $140,000

Beginning Accounts payable = $48,000

Ending Accounts payable = $56,000

Total Purchase:

= Cost of Goods sold + Ending Inventory - Beginning Inventory

= $1,760,000 + $140,000 - $92,000

= $1,808,000

Cash paid for merchandise purchased:

= Total Purchase + Beginning Accounts payable - Ending Accounts payable

= $1,808,000 + $48,000 - $56,000

= $1,800,000