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

-Compute the amount of Seldin's cash payments for purchases of merchandise during the current year.
A)$130,000
B)$125,000
C)$133,000
D)$127,000

Question

[The following information applies to the questions displayed below.]
The financial statements of Seldin,Inc. ,provide the following information for the current year:
 
-Compute the amount of Seldin's cash payments for purchases of merchandise during the current year.
A)$130,000 
B)$125,000 
C)$133,000 
D)$127,000

Quizplus · Accepted Answer

The cash payments for purchases of merchandise can be calculated as follows: 
Beginning inventory + Net purchases - Ending inventory = Cost of goods sold 
$320,000 + $200,000 - $286,000 = $234,000 
Since the question asks for cash payments, we need to add the decrease in accounts payable: 
$234,000 + $17,000 = $251,000 
However, the question only asks for cash payments for purchases of merchandise, so we need to subtract the increase in accounts payable due to purchases: 
$251,000 - $118,000 = $133,000

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