A company's Inventory balance at 12/31/11 was $188,000 and $200,000 at 12/31/10. Its Accounts Payable balance at 12/31/11 was $84,000 and $80,000 at 12/31/10, and its cost of goods sold for 2011 was $720,000. The company's total amount of cash payments for merchandise in 2011 equals:

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The correct answer is A.The company's total amount of cash payments for merchandise in 2011 equals $704,000. This is calculated as follows:Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold$188,000 + Purchases - $200,000 = $720,000Purchases = $720,000 + $12,000 = $732,000Accounts Payable is a liability account that represents the amount of money that a company owes to its suppliers for goods or services that have been purchased but not yet paid for. The increase in Accounts Payable from 12/31/10 to 12/31/11 is $4,000 ($84,000 - $80,000). This means that the company has not yet paid $4,000 of the $732,000 in purchases that it made in 2011.Therefore, the company's total amount of cash payments for merchandise in 2011 is $732,000 - $4,000 = $728,000.

A Company's Inventory Balance at 12/31/11 Was $188,000 and $200,000