Question

Exercise 21-2 (Algo) Determine cash paid to suppliers of merchandise [LO21-3, 21-6]

Shown below in T-account format are the beginning and ending balances ($ in millions) of both inventory and accounts payable.

Inventory
Beginning balance	70.0
Ending balance	71.0

Accounts Payable
		16.0	Beginning balance
		18.2	Ending balance

Required:
1. Use a T-account analysis to determine the amount of cash paid to suppliers of merchandise during the reporting period if cost of goods sold was $200 million.

Cash paid to suppliers

million

2. Prepare a summary entry that represents the net effect of merchandise purchases during the reporting period.

• Record the net effect of merchandise purchases during the reporting period.

Answer 1

1)	Inventory					Accounts Payable (A/P)
	Beg. Bal.	$   70.00	COGS	$ 200.00		Cash	$ 198.80	Beg. Bal.	$   16.00
	A/P	$ 201.00	End. Bal.	$   71.00		End. Bal	$   18.20	Inventory	$ 201.00
		$ 271.00		$ 271.00			$ 217.00		$ 217.00
	Therefore, Cash paid to suppliers is $ 198.80 million

2)	Entry to record merchandise purchase
				(in millions)
	Particulars			Debit	Credit
	Inventory			$ 201.00
	To Accounts Payable				$ 201.00