Determining Cash Paid for Inventory Purchases in 2013
How can we determine the cash paid for the purchase of inventory for 2013?
If credit purchases are $100,000, the beginning accounts payable is $30,000, and the ending accounts payable is $42,000, what is the cash paid for the purchase of inventory for 2013?
Answer:
The cash paid for the purchase of inventory for 2013 is $88,000.
To determine the cash paid for the purchase of inventory for 2013, we need to consider the changes in accounts payable. Accounts payable represents the amount owed by a business to its suppliers for goods or services received on credit.
Given:
- Credit purchases: $100,000
- Beginning accounts payable: $30,000
- Ending accounts payable: $42,000
To calculate the cash paid for inventory purchases, we need to find the change in accounts payable. The formula to calculate the change in accounts payable is:
Change in Accounts Payable = Ending Accounts Payable - Beginning Accounts Payable
Substituting the given values: Change in Accounts Payable = $42,000 - $30,000 = $12,000
The change in accounts payable represents the increase in the amount owed to suppliers. Since the credit purchases were $100,000, the cash paid for inventory purchases can be calculated by subtracting the change in accounts payable from the credit purchases:
Cash Paid for Inventory Purchases = Credit Purchases - Change in Accounts Payable
Substituting the values: Cash Paid for Inventory Purchases = $100,000 - $12,000 = $88,000
Therefore, the cash paid for the purchase of inventory for 2013 is $88,000. It is important to keep track of accounts payable and credit purchases to effectively manage cash flow and inventory expenses.