In 2013, Nutrient Company reported sales of $725,000 and cost of goods sold of $480,000. During 2013, Nutrient's Inventory account increased $25,000 and its Accounts Payable account (which relates solely to the purchase of merchandise) decreased $18,000. Nutrient Company's payments to suppliers for inventory during 2013 were:

Question

Quizplus · Accepted Answer

Cost of goods sold can be calculated using the following formula:
Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold
We are given that Inventory account increased $25,000, which means that Nutrient Company purchased inventory worth:
Beginning Inventory + Purchases = Ending Inventory + Increase in Inventory
Beginning Inventory + Purchases = Ending Inventory + $25,000
Purchases = Ending Inventory - Beginning Inventory + $25,000
We are also given that Accounts Payable account decreased $18,000, which means that Nutrient Company paid its suppliers $18,000 less than the amount it purchased on credit. Therefore, the actual cash payments made by Nutrient Company to suppliers during 2013 were:
Purchases - Decrease in Accounts Payable = Actual Payments Made
Purchases - (-$18,000) = Purchases + $18,000 = Actual Payments Made
Substituting the values we get:
Purchases + $18,000 = $725,000 - $480,000 + $25,000
Purchases = $523,000
Hence, the correct answer is B) $523,000.

In 2013, Nutrient Company Reported Sales of $725,000 and Cost