Einstein Corporation reported a decrease in inventory of $15,000.The cost of goods sold for the year was $180,000.There was also a $5,000 decrease in accounts payable from the beginning of the year to the end of the year.What is Einstein's cash payment to suppliers for inventory?
A)$158,000
B)$170,000
C)$188,000
D)$202,000

Question

Quizplus · Accepted Answer

The cash payment to suppliers for inventory can be calculated using the formula: 
Beginning inventory + Purchases - Ending inventory = Cost of goods sold 
We have: 
Purchases - $15,000 = $180,000 
Purchases = $195,000 
Therefore, the cash payment to suppliers for inventory is: 
Purchases - Decrease in accounts payable 
$195,000 - $5,000 = $190,000 
However, this amount includes the decrease in accounts payable, so we need to add that back to get the cash payment to suppliers for inventory: 
$190,000 + $5,000 = $195,000 
However, $15,000 of the purchases went towards decreasing the inventory, so the actual cash payment to suppliers for inventory is: 
$195,000 - $15,000 = $180,000, which is answer choice B.

Einstein Corporation Reported a Decrease in Inventory of $15,000