Answer:
The correct option is C. $704,000
Explanation:
The computation of total cash payments is shown below:
= Cost of goods sold - net effect of inventory balance - net effect of accounts payable balance
where,
Net effect of inventory balance = Opening inventory balance - Ending inventory balance
= $200,000 - $188,000
= $12,000
Net effect of inventory balance = Ending accounts payable balance - opening accounts payable balance
= $84,000 - $80,000
= 4,000
So, the cash payment is equals to
= $720,000 - $12,000 - $4,000
= $704,000
Hence, the correct option is C. $704,000
The company's total amount of cash payments for merchandise during the year equals $704,000
This refers to the amount of cash paid to purchase goods and services.
The computation of total cash payments is shown below:
= Cost of goods sold - net effect of inventory balance - net effect of accounts payable balance
where,
Net effect of inventory balance
= Opening inventory balance - Ending inventory balance
= $200,000 - $188,000
= $12,000
Net effect of inventory balance
= Ending accounts payable balance - opening accounts payable balance
= $84,000 - $80,000
= 4,000
So, the cash payment is equals to
= $720,000 - $12,000 - $4,000
= $704,000
Hence, the company's total amount of cash payments for merchandise during the year equals $704,000
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