All purchases of inventory are for cash. If inventory at the beginning of the year is $63 000 and at the end $88 000 and the cost of sales is $200 000, the cash paid for inventory purchased for the year is:
A)$175 000
B)$225 000
C)$200 000
D)None of the above

Question

Quizplus · Accepted Answer

Cash paid for inventory = (Inventory at the beginning of the year + purchases during the year) - Inventory at the end of the year
We are given:
- Inventory at the beginning of the year = $63 000
- Inventory at the end of the year = $88 000
- Cost of sales = $200 000
We need to find 'purchases during the year'.
Using the above formula, we can rearrange it to find the value of purchases during the year:
Purchases during the year = (Inventory at the beginning of the year + purchases during the year) - Inventory at the end of the year
Purchases during the year = Inventory at the beginning of the year - Inventory at the end of the year + Cost of sales
Purchases during the year = $63 000 - $88 000 + $200 000
Purchases during the year = $175 000
Therefore, the cash paid for inventory purchased for the year is $175 000, which corresponds to choice B.

All Purchases of Inventory Are for Cash