D is corrent. Cash paid to suppliers can be computed using either a formula or T-accounts. The formula is| CGS | + | (End. inv. – Beg. inv.) | + | (Beg AP – End AP) | = | Cash paid to suppliers | | $270,000 | + | ($60,000 – $45,000) | + | ($39,000 – $26,000) | = | Cash paid to suppliers | | $270,000 | + | $15,000 | + | $13,000 | = | $298,000 |
The increase in inventory ($15,000) is added to CGS because additional inventory was purchased beyond what was sold. The decrease in AP is added because cash payments were made in excess of purchases. Using T-accounts, purchases is computed using the inventory account, after which payments are computed using the accounts payable account. 1. Purchases = $285,000  2. Payments = $298,000A is incorrect. Refer to the correct answer explanation.B is incorrect. Refer to the correct answer explanation.C is incorrect. Refer to the correct answer explanation. |
