Ogden Company uses its accounts payable account only for inventory purchases.The following account balances were reported on its financial statements: $$\begin{array} { | l | c | c | }
\hline { \text { Accounts } } & \text { December 31, 2018 } & \text { December 31, 2017 } \
\hline \begin{array} { l }
\text { Merchandise } \
\text { inventory }
\end{array} & \$ 70,000 & \$ 66,000 \
\hline \text { Accounts payable } & 68,000 & 65,000 \
\hline \text { Cost of goods sold } & 889,000 & 856,000 \
\hline
\end{array}$$ How much cash did Ogden Company pay to suppliers during 2018?

Question

Ogden Company uses its accounts payable account only for inventory purchases.The following account balances were reported on its financial statements: $$\begin{array} { | l | c | c | } 
\hline { \text { Accounts } } & \text { December 31, 2018 } & \text { December 31, 2017 } \
\hline \begin{array} { l } 
\text { Merchandise } \
\text { inventory }
\end{array} & \$ 70,000 & \$ 66,000 \
\hline \text { Accounts payable } & 68,000 & 65,000 \
\hline \text { Cost of goods sold } & 889,000 & 856,000 \
\hline
\end{array}$$ How much cash did Ogden Company pay to suppliers during 2018?

Quizplus · Accepted Answer

To calculate the cash paid to suppliers, we start with the cost of goods sold (COGS) for the year, then adjust for the change in inventory and accounts payable. The formula is: COGS + Increase in Inventory - Increase in Accounts Payable = Cash Paid to Suppliers. For 2018, this calculation is $889,000 + ($70,000 - $66,000) - ($68,000 - $65,000) = $890,000.

Ogden Company Uses Its Accounts Payable Account Only for Inventory