Confused about this particular explanation….I’m not sure if I understand it correctly…. could use some clarification.
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COGS=75
INVENTORY DOWN BY 6
THEREFORE IN THIS YEAR WE’VE SOLD LAST YEAR’S INVENTORY.
THEREFORE THIS YEAR’S PURCHASES = 75-6 = 69
AC PAYABLE RISES BY 2.
IT MEANS WE HAVE BOUGHT 2M GOODS ON CREDIT OUT OF 69.
THEREFORE CASH PURCHASES = 69-2 = 67
( ASSETS AND LIABILITIES ARE JUST GIVEN FOR DISTRACTION. IGNORE THEM)