Question

Planet Music buys all of its inventory on credit. During 2005, Planet Music's inventory account increased by $10,000. Which of the following statements must be true for Planet Music during 2005?
A. It made payments of less than $10,000 to suppliers.
B. It made cash payments of $10,000 to suppliers.
C. It made more cash payments to its suppliers than it recorded as cost of goods sold.
D. It paid less cash to suppliers than it recorded as cost of goods sold.

Answer 1

Answer: C. It made more cash payments to its suppliers than it recorded as cost of goods sold.

Explanation:

From the question, we are informed that Planet Music buys all of its inventory on credit and that during 2005, Planet Music's inventory account increased by $10,000.

The option that is true for Planet Music during 2005 is that Planet Music made more cash payments to its suppliers than it recorded as cost of goods sold.