Cold and Flu Corporation reported the following information for 2011 and 2012. Inventory is not reported as there was no change in inventory from December 31, 2011, to December 31, 2012. How much cash was paid for inventory during 2012?

Question

Cold and Flu Corporation reported the following information for 2011 and 2012. Inventory is not reported as there was no change in inventory from December 31, 2011, to December 31, 2012.  How much cash was paid for inventory during 2012?

Quizplus · Accepted Answer

Since there was no change in inventory from December 31, 2011, to December 31, 2012, the cost of goods sold for 2012 can be calculated by subtracting the 2011 inventory from the sum of the 2012 beginning inventory and purchases. Therefore, Cost of Goods Sold for 2012 = Beginning Inventory 2012 + Purchases 2012 - Beginning Inventory 2011 = $600,000 + $910,000 - $685,000 = $825,000. Since the cash payments made for inventory is the sum of the beginning inventory and purchases, less accounts payable, the cash paid for inventory during 2012 can be calculated as Beginning Inventory 2012 + Purchases 2012 - Accounts Payable 2012 = $600,000 + $910,000 - $265,000 = $245,000. Therefore, the answer is D.

Cold and Flu Corporation Reported the Following Information for 2011