Bertram,Inc.had beginning and ending accounts payable balances of $400 and $450,respectively.Inventory had beginning and ending balances of $450 and $425,respectively.All inventory purchases are made on account.If cost of goods sold equaled $350,how much cash was spent to purchase inventory?
A) $275
B) $250
C) $400
D) $350

Question

Quizplus · Accepted Answer

To calculate the cash spent to purchase inventory, we need to find the total purchases made during the period.

Total Purchases = Ending Inventory + Cost of Goods Sold - Beginning Inventory

Total Purchases = $425 + $350 - $450

Total Purchases = $325

As all inventory purchases are made on account, the total purchases represent the accounts payable balance. Hence, cash spent to purchase inventory is the increase in accounts payable balance.

Increase in Accounts Payable = Ending Accounts Payable - Beginning Accounts Payable

Increase in Accounts Payable = $450 - $400

Increase in Accounts Payable = $50

Therefore, cash spent to purchase inventory = Increase in Accounts Payable + Total Purchases

Cash spent to purchase inventory = $50 + $325

Cash spent to purchase inventory = $275

Hence, the answer is A) $275.