A $10,000 increase in accounts payable combined with a $4,000 decrease in inventory will cause the cash payments to suppliers to
A) increase by $10,000.
B) increase by $4,000.
C) increase by $6,000.
D) decrease by $14,000.

Question

Quizplus · Accepted Answer

An increase in accounts payable indicates that the company owes more to its suppliers, suggesting that it has not paid out cash yet, thereby not reducing its cash balance by this increase. A decrease in inventory suggests that inventory has been sold or used up without replacing it, which does not directly affect cash payments to suppliers. Together, these imply that cash payments to suppliers have effectively decreased because the company has delayed paying $10,000 and reduced its inventory by $4,000 without needing to replace it immediately. This results in a net decrease in cash payments to suppliers by $14,000.

A $10,000 Increase in Accounts Payable Combined with a $4,000