Hupta Corporation reports cost of goods sold for the year ended December 31, 1998 of $3,500. Other information as of December 31 is as follows:
1997 1998
Accounts Receivable $500 $550
Inventory $400 $380
Accounts Payable $250 $290
Cash paid to suppliers for year ended December 31, 1998 is ________.
Click on the arrows to vote for the correct answer
A. B. C. D.C
An increase in accounts payable shows that $40 less than the $3,480 of purchases ($3,500 COGS + (20) change in inventory) was paid: $3,480 - $40 = $3,440.
To calculate the cash paid to suppliers for the year ended December 31, 1998, we need to consider changes in inventory and accounts payable. The formula to calculate cash paid to suppliers is:
Cash Paid to Suppliers = Cost of Goods Sold + Increase in Inventory - Increase in Accounts Payable
Let's break down the given information and calculate the cash paid to suppliers step by step:
Cost of Goods Sold (COGS): The company reported a COGS of $3,500 for the year ended December 31, 1998.
Increase in Inventory: To calculate the increase in inventory, we subtract the inventory value at the beginning of the year (1997) from the inventory value at the end of the year (1998).
Increase in Inventory = Inventory 1998 - Inventory 1997 = $380 - $400 = -$20 (negative sign indicates a decrease in inventory)
Increase in Accounts Payable = Accounts Payable 1998 - Accounts Payable 1997 = $290 - $250 = $40
Now, let's calculate the cash paid to suppliers using the formula:
Cash Paid to Suppliers = COGS + Increase in Inventory - Increase in Accounts Payable = $3,500 + (-$20) - $40 = $3,500 - $20 - $40 = $3,440
Therefore, the cash paid to suppliers for the year ended December 31, 1998, is $3,440. Hence, the correct answer is C. $3,440.