Statler Corporation has beginning and ending accounts payable balances of $400 and $800, respectively. Inventory had beginning and ending balances of $700 and $600, respectively. If cost of goods sold was $2,800, how much cash was spent to purchase inventory?
A)$2,100
B)$2,500
C)$2,700
D)$2,300

Question

Quizplus · Accepted Answer

The cash spent to purchase inventory is calculated as: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. Rearranging for Purchases gives: Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory. Purchases = $2,800 + $600 - $700 = $2,700. The change in accounts payable ($800 - $400 = $400) indicates that $400 of the purchases were not paid in cash. Therefore, cash spent = Purchases - Increase in Accounts Payable = $2,700 - $400 = $2,300.

Statler Corporation Has Beginning and Ending Accounts Payable Balances of $400