During the year, Carla's Pet Shop's merchandise inventory decreased by $20,000. If the company's cost of goods sold for the year was $300,000, purchases must have been

Question

Quizplus · Accepted Answer

The formula for calculating purchases is:
Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory
Since we are given that the merchandise inventory decreased by $20,000, that means the ending inventory is $20,000 less than the beginning inventory. Therefore:
Ending Inventory = Beginning Inventory - $20,000
Plugging this into the formula above, we get:
Purchases = $300,000 + (Beginning Inventory - $20,000) - Beginning Inventory
Simplifying this, we get:
Purchases = $300,000 - $20,000
Purchases = $280,000

Therefore, the answer is B.

During the Year, Carla's Pet Shop's Merchandise Inventory Decreased by $20,000