A company's inventory account increased $26,500 and its accounts payable account decreased $18,250 during the year.The accounts payable relates only to the acquisition of inventory.Sales were $789,500 and cost of goods sold was $532,700.What was the amount of payments to suppliers of inventory?

Question

Quizplus · Accepted Answer

Inventory increased by $26,500, which means that inventory purchases were $26,500 higher than the cost of goods sold. We can calculate the purchases as:
Purchases = Cost of goods sold + Increase in inventory
Purchases = $532,700 + $26,500 = $559,200

The decrease in accounts payable relates only to the acquisition of inventory, so payments to suppliers of inventory would be:
Payments to suppliers = Purchases - Decrease in accounts payable
Payments to suppliers = $559,200 - $18,250 = $541,950.

Therefore, the correct answer is B, which is the closest to $541,950.

A Company's Inventory Account Increased $26,500 and Its Accounts Payable