Answer (D) is correct . Projected cost of sales is 60% of $2,400,000 of sales, or $1,440,000. Projected purchases is the $1,440,000 cost of sales less $60,000 projected decrease in inventory which is $1,380,000. Projected cash payments is the projected purchases of $1,380,000 plus the $100,000 projected decrease in accounts payable, which is $1,480,000.
Answer (A) is incorrect because The amount of $920,000 equals 40% of sales minus the decrease in accounts payable, plus the decrease in inventories.
Answer (B) is incorrect because The amount of $1,000,000 equals 40% of sales, plus the decrease in accounts payable, minus the decrease in inventories.
Answer (C) is incorrect because The amount of $1,400,000 equals 60% of sales, minus the decrease in accounts payable, plus the decrease in inventories.
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Arrow’s estimated cash disbursements for inventories are
