Inventory on January 1 and December 31 is $46,000 and $42,000, respectively. Accounts payable on January 1 and December 31 are $31,000 and $29,000, respectively. During the year, cost of goods sold is $186,000. How much is the current year's cash payments to suppliers of inventory?

Question

Quizplus · Accepted Answer

To calculate the cash payments to suppliers, we start with the cost of goods sold (COGS) and adjust it for the change in inventory and accounts payable. The formula is: COGS + Increase in Inventory - Increase in Accounts Payable = Cash Payments to Suppliers. Here, the inventory decreased by $4,000 ($46,000 - $42,000) and accounts payable decreased by $2,000 ($31,000 - $29,000), so the calculation is $186,000 + (-$4,000) - (-$2,000) = $184,000.

Inventory on January 1 and December 31 Is $46,000 and $42,000