During fiscal 2016, Shoe Productions recorded inventory purchases on credit of $337.8 million. The financial statement effect of these purchase transactions would be to: Select one: a. Increase expenses (Cost of goods sold) by $337.8 million b. Increase liabilities (Accounts payable) by $337.8 million and decrease noncash assets (Inventory) by $337.8 million c. Increase liabilities (Accounts payable) by $337.8 million d. Decrease cash by $337.8 million e. Decrease noncash assets (Inventory) by $337.8 million
(C) Increase liabilities (Accounts payable) by $337.8 million.
What is inventory?
Inventory, often known as stock, refers to the items and supplies that a company keeps for the purpose of resale, manufacturing, or use.
Inventory management is largely concerned with establishing the shape and positioning of stocked products.
What is purchasing on credit?
A credit buys, sometimes known as purchasing anything "on credit," is a purchase made today that will be paid for later.
When you use a credit card, for example, your financial institution pays for the products or services upfront and then collects the payments from you later.
Purchase on credit refers to an increase in liabilities.
Therefore, the correct option is (C) Increase liabilities (Accounts payable) by $337.8 million.
