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The financial statements of New World,Inc. ,provide the following information for the current year:

-Compute the amount of New World's cash payments for purchases of merchandise during the current year.
A)$1,627,500
B)$1,622,250
C)$1,638,000
D)$2,157,750

Question

[The following information applies to the questions displayed below.]
The financial statements of New World,Inc. ,provide the following information for the current year:
 
-Compute the amount of New World's cash payments for purchases of merchandise during the current year.
A)$1,627,500 
B)$1,622,250 
C)$1,638,000 
D)$2,157,750

Quizplus · Accepted Answer

To compute cash payments for purchases of merchandise, we need to take the cost of goods sold and add the increase in accounts payable and then subtract the decrease in accounts payable. 
Cash payments for purchases of merchandise = Cost of Goods Sold + Increase in Accounts Payable - Decrease in Accounts Payable 
= $1,620,000 + ($45,000 - $42,750) 
= $1,622,250 
Therefore, the correct answer is B.

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