During fiscal 2016, Shoe Productions recorded inventory purchases on credit of $337.8 million. The financial statement effect of these purchase transactions would be to:
A) Increase liabilities (Accounts payable) by $337.8 million
B) Decrease cash by $337.8 million
C) Increase expenses (Cost of goods sold) by $337.8 million
D) Decrease noncash assets (Inventory) by $337.8 million
E) Both A and D

Question

Quizplus · Accepted Answer

Purchasing inventory on credit increases liabilities (specifically, accounts payable) by the amount of the purchase, as the company now owes money to its suppliers.

During Fiscal 2016, Shoe Productions Recorded Inventory Purchases on Credit