A company's Inventory account increased $27,900 and its Accounts Payable account decreased $19,500 during the year. The Accounts Payable relates only to the acquisition of inventory. Sales were $795,300 and Cost of Goods Sold was $549,400. What was the payment made to the suppliers of inventory?

Question

Quizplus · Accepted Answer

The payment to suppliers can be calculated using the formula: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. Here, Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory. Since the Inventory increased by $27,900, Purchases = $549,400 + $27,900 = $577,300. The decrease in Accounts Payable of $19,500 indicates that payments were made, so the total payment to suppliers = Purchases + Decrease in Accounts Payable = $577,300 + $19,500 = $596,800.

A Company's Inventory Account Increased $27,900 and Its Accounts Payable