A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year.Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year,and its cost of goods sold for the year was $720,000.The company's total amount of cash payments for merchandise during the year equals:
A)$704,000.
B)$712,000.
C)$720,000.
D)$728,000.
E)$736,000.

Question

Quizplus · Accepted Answer

The correct answer is A because the total amount of cash payments for merchandise during the year is equal to the cost of goods sold plus the increase in accounts payable minus the increase in inventory. In this case, the cost of goods sold is $720,000, the increase in accounts payable is $84,000 - $80,000 = $4,000, and the increase in inventory is $188,000 - $200,000 = -$12,000. Therefore, the total amount of cash payments for merchandise during the year is $720,000 + $4,000 - (-$12,000) = $704,000.

A Company's Inventory Balance at the End of the Year