Fertilizer Incorporated reports an increase in Accounts Payable of $9,200 and an increase in inventory of $45,000 for the current year. Accounts Payable relates solely to the purchase of merchandise. Sales on account were $532,100 and cost of goods sold was $358,000. The total purchases of merchandise for the period were:
A) $174,100
B) $403,000
C) $358,000
D) $313,000

Question

Quizplus · Accepted Answer

The purchases can be calculated using the following formula:

Purchases = cost of goods sold + increase in inventory - decrease in inventory
Since there is no information about a decrease in inventory, we can assume it to be zero. Therefore:
Purchases = cost of goods sold + increase in inventory
Purchases = $358,000 + $45,000
Purchases = $403,000

Therefore, the correct answer is B.

Fertilizer Incorporated Reports an Increase in Accounts Payable of $9,200