Answer (B) is correct . The cost of goods sold was $3,000,000 [$4,000,000 sales × (1.0 – 25% gross margin)]. Purchases equal cost of goods sold adjusted for the change in inventories. A decrease in inventories signifies that purchases were less than cost of goods sold. Hence, purchases for April were $2,840,000 ($3,000,000 CGS – $160,000 decrease in inventories). A decrease in payables related to inventories indicates that cash disbursements exceeded purchases. Accordingly, the cash outflow for inventories was $3,115,000 ($2,840,000 + $275,000 decrease in accounts payable).
Answer (A) is incorrect because The amount of $3,275,000 does not include the decrease in inventories which should be subtracted from cost of goods sold in determining cash disbursements.
Answer (C) is incorrect because The purchases for April is $2,840,000.
Answer (D) is incorrect because Subtracting the decrease in accounts payable instead of adding it results in $2,565,000.
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For April, the estimated cash disbursements for inventories were
