During the year, Sarah's Pet Shop's merchandise inventory decreased by $40,000. If the company's cost of goods sold for the year was $600,000, purchases would have been
A) $640,000.
B) $560,000.
C) $520,000.
D) Unable to determine.

Question

Quizplus · Accepted Answer

The formula for cost of goods sold is: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. Since the inventory decreased by $40,000, purchases would be $600,000 - (-$40,000) = $560,000.

During the Year, Sarah's Pet Shop's Merchandise Inventory Decreased by $40,000