Erie Company reports the following comparative balance sheets and income statement information for the current year.
Comparative Balance Sheets
12/31/2015 12/31/2016

-Assuming accounts payable is used for inventory purchases only,what was the amount of cash paid for inventory purchases during the year?
A)$32,000
B)$176,000
C)$192,000
D)$160,000

Question

Erie Company reports the following comparative balance sheets and income statement information for the current year.
Comparative Balance Sheets
12/31/2015 12/31/2016
  
-Assuming accounts payable is used for inventory purchases only,what was the amount of cash paid for inventory purchases during the year?
A)$32,000 
B)$176,000 
C)$192,000 
D)$160,000

Quizplus · Accepted Answer

Ending balance of inventory of $24,000 = Beginning balance of inventory of $8,000 + Increase due to inventory purchased on account (the unknown)- Decrease due to cost of goods sold of $160,000
Inventory purchased on account = $24,000 - $8,000 + $160,000 = $176,000
Ending balance of accounts payable of $32,000 = Beginning balance of accounts payable of $48,000 + Increase due to inventory purchased on account of $176,000 - Decrease due to cash paid for inventory (the unknown)
Cash paid for inventory = $48,000 + $176,000 - $32,000 = $192,000

Erie Company Reports the Following Comparative Balance Sheets and Income