Used Car Dealer
A used car dealer reported the following information:
$\begin{array}{llr}
\text { Accounts payable, December 31 , Year 2 } &\$95,000\
\text { Accounts payable, December 31, Year 1 } &50,000\
\text {Cost of goods sold for Year 2 } &560,000
\end{array}$

-Refer to the figure Used Car Dealer.Assuming there was no change in inventory during the period,how much cash was paid for merchandise purchases during Year 2?

Question

Used Car Dealer
A used car dealer reported the following information:
 $\begin{array}{llr}
  \text { Accounts payable, December 31 , Year 2  } &\$95,000\
 \text { Accounts payable, December 31, Year 1  } &50,000\
 \text {Cost of goods sold for Year 2  } &560,000
\end{array}$

-Refer to the figure Used Car Dealer.Assuming there was no change in inventory during the period,how much cash was paid for merchandise purchases during Year 2?

Quizplus · Accepted Answer

The increase in accounts payable from Year 1 to Year 2 is $95,000 - $50,000 = $45,000. Since there was no change in inventory, this $45,000 increase in accounts payable must have been offset by a $45,000 decrease in cash. Therefore, the cash paid for merchandise purchases during Year 2 was $560,000 (cost of goods sold) + $45,000 (decrease in cash) = $605,000.

Used Car Dealer a Used Car Dealer Reported the Following

Used Car Dealer
a Used Car Dealer Reported the Following