When recording the raw materials purchases in transaction (a) above, the Cash account will increase (decrease) by:

A) $726,920
B) ($694,850)
C) ($726,920)
D) $694,850

Question

When recording the raw materials purchases in transaction (a) above, the Cash account will increase (decrease) by:A) $726,920B) ($694,850)C) ($726,920)D) $694,850

Bridget Saunders · Accepted Answer

Final Answer : C, Explanation :  When recording the raw materials purchases, we are assuming that the transaction was made on account (credit), as the question states that Accounts Payable increased. Therefore, Cash would not be affected in this transaction. The increase in Accounts Payable would be offset by the increase in Raw Materials Inventory. ($726,920 increase in Raw Materials Inventory and a $726,920 increase in Accounts Payable). Therefore, the correct choice would be C, which represents a decrease in Cash of $726,920 (negative amount indicates a decrease). The other choices are incorrect as they either increase Cash or represent the incorrect amount. Cash decreases by the actual cost of the raw materials purchased, which is AQ × AP = 106,900 liters × $6.80 per liter = $726,920.

When recording the raw materials purchases in transaction (a) above, the Cash account will increase (decrease) by:

A) $726,920
B) ($694,850)
C) ($726,920)
D) $694,850

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Learning Objectives

Learning Objectives

Related questions

When recording the raw materials purchases in transaction (a) above, the Cash account will increase (decrease) by:A) $726,920B) ($694,850) C) ($726,920) D) $694,850

Definitions

Learning Objectives

Learning Objectives

Related questions

When recording the raw materials purchases in transaction (a) above, the Cash account will increase (decrease) by:

A) $726,920
B) ($694,850)
C) ($726,920)
D) $694,850