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Hessen is a wholesaler. The sales budget for November is $500,000 with a gross margin percentage of 65 percent. All purchases are paid for in the month following the purchase. Hessen's beginning inventory is $40,000 and an ending inventory, stated at cost, of $32,000 is desired. The beginning balance in accounts payable is $200,000.
-What is the November 30th balance in accounts payable?

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The correct answer is A.The November 30th balance in accounts payable is $167,000. This is calculated as follows:Beginning balance in accounts payable: $200,000Add: Purchases for November (65% of $500,000 sales budget): $325,000Total: $525,000Less: Payments for November purchases: $325,000Ending balance in accounts payable: $200,000However, we also need to consider the change in inventory. The desired ending inventory is $32,000, which is $8,000 less than the beginning inventory of $40,000. This means that the cost of goods sold for November is $40,000 - $32,000 = $8,000.Since all purchases are paid for in the month following the purchase, the November 30th balance in accounts payable is reduced by the cost of goods sold for November. Therefore, the ending balance in accounts payable is $200,000 - $8,000 = $167,000.

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