Cadzow Inc purchases all of its inventory on credit. On January 1, 2008 Cadzow had $1,750,000 of Inventory. Cost of goods Sold during 2008 was $5,650,000. The beginning and ending balances in Cadzow’s Accounts Payable account on January 1, 2008 and December 31, 2008 were $925,000 and $1,150,000 respectively. How much did Cadzow pay its suppliers during 2008?
To find out how much Cadzow Inc paid its suppliers during 2008, we need to calculate the change in the Accounts Payable balance and adjust it for any increase or decrease in inventory.
Here's how to calculate it step by step:
1. Find the change in the Accounts Payable balance:
Ending Accounts Payable - Beginning Accounts Payable
$1,150,000 - $925,000 = $225,000
2. Determine the increase or decrease in inventory:
Beginning Inventory - Cost of Goods Sold + Ending Inventory
$1,750,000 - $5,650,000 + Ending Inventory = 0
(Since there is no information given for the Ending Inventory, we assume it is zero to balance the equation)
3. Add the change in Accounts Payable and the decrease in inventory:
Change in Accounts Payable + Decrease in Inventory
$225,000 + $1,750,000 = $1,975,000
According to the calculations, Cadzow Inc paid its suppliers a total of $1,975,000 during 2008.