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If Cost of Goods Sold was $25,000, there was a decrease in Inventory of $5,000, and an increase in Accounts Payable of $5,700, what would be the cash amount paid for Merchandise Inventory?
A) $25,700
B) $14,300
C) $35,700
D) $24,300
Cost of Goods Sold
Expenditures directly resulting from the manufacturing of a company’s products for sale, comprising materials and employee wages.
Merchandise Inventory
Items purchased by a company for the purpose of being sold to customers; considered a current asset on the balance sheet.
Accounts Payable
Money owed by a company to its creditors for goods or services that have been received but not yet paid for.
- Determining and evaluating cash receipts and disbursements through the direct method among various accounts including operating expenses, salaries, merchandise inventory, and insurance.
- Inquiry into the consequences of shifts in working capital variables, including Prepaid Expenses, Salaries Payable, Accounts Receivable, Inventories, and Accounts Payable, on cash liquidity.
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Learning Objectives
- Determining and evaluating cash receipts and disbursements through the direct method among various accounts including operating expenses, salaries, merchandise inventory, and insurance.
- Inquiry into the consequences of shifts in working capital variables, including Prepaid Expenses, Salaries Payable, Accounts Receivable, Inventories, and Accounts Payable, on cash liquidity.
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