Question

19. A company's accounts payable is used only for the purchase of inventory, and all inventory is purchased on account. At the beginning of the year, the balance in Inventory was $25,000, and in Accounts Payable was $10,000. At the end of the year, the balance in Inventory was $32,000 and in Accounts Payable was $7,000. The company's income statement reported Cost of goods sold expense of $105,000 for the year. How much cash was paid to suppliers on account? a) $112,000 b) $115,000 c) $98,000 d) None of the above

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Answer 1

19)

The correct answer is b) $115,000

Supporting calculations:

First calculate the inventory purchases from reverse side:
Cost of Goods Sold	$105,000
Add: Ending inventory	$32,000
Less: Beginning inventory	($25,000)
Inventory Purchases	$112,000
Now, calculate the cash paid to suppliers on account:
Beginning balance of Accounts Payable	$10,000
Add: Purchase of Inventory	$112,000
Less: Ending balance of Accounts Payable	($7,000)
Cash paid to Suppliers on Account	$115,000

Therefore, cash paid to suppliers on account is $115,000.