Ale Company reports a $16000 increase in inventory and a $8000 increase in accounts payable during the year. Cost of Goods Sold for the year was $150000. The cash payments made to suppliers were
A) $150000.
B) $158000.
C) $126000.
D) $174000.

Question

Quizplus · Accepted Answer

The increase in inventory of $16,000 would mean that inventory was purchased during the year, while the increase in accounts payable of $8,000 would mean that some of the inventory was purchased on credit. To determine the cash payments made to suppliers, we need to adjust Cost of Goods Sold for the change in inventory and then add any increase in accounts payable.

Adjusted COGS = COGS + Increase in Inventory 
Adjusted COGS = $150,000 + $16,000 
Adjusted COGS = $166,000

Cash Payments Made to Suppliers = Adjusted COGS + Increase in Accounts Payable 
Cash Payments Made to Suppliers = $166,000 + $8,000 
Cash Payments Made to Suppliers = $174,000

Therefore, the correct answer is B) $158,000.

Ale Company Reports a $16000 Increase in Inventory and a $8000