RJB made inventory purchases amounting to $200,000 during 2014. During the year, its accounts payable (all of which arose from inventory purchases) increased by $20,000. The company had sales of $1,000,000 and is subject to a gross profit percentage of 90%. How much cash did RJB pay to its inventory suppliers during 2014?
A) $120,000
B) $180,000
C) $320,000
D) $220,000

Question

Quizplus · Accepted Answer

RJB's cash payments to inventory suppliers can be calculated by subtracting the increase in accounts payable from the total inventory purchases. The inventory purchases were $200,000, and accounts payable increased by $20,000, indicating that not all purchases were paid for in cash. Therefore, the cash paid is $200,000 - $20,000 = $180,000.

RJB Made Inventory Purchases Amounting to $200,000 During 2014