Can anyone offer a deeper explanation on this…I got one before but I still cant wrap my head around it.
Acme Co.’s accounts payable balance at December 31 was $850,000 before necessary year-end adjustments, if any, related to the following information:
• At December 31, Acme has a $50,000 debit balance in its accounts payable resulting from a payment to a supplier for goods to be manufactured to Acme’s specifications.
• Goods shipped FOB destination on December 20 were received and recorded by Acme on January 2; the invoice cost was $45,000.
In its December 31 balance sheet, what amount should Acme report as accounts payable?
$850,000
$895,000
$900,000
$945,000
$900 This answer is correct. Accounts payable should be equal to $900,000 ($850,000 + $50,000 payment to supplier). The $50,000 payment to supplier represents a deposit (asset) for goods that had not yet been received. The goods shipped FOB destination were accounted for in an appropriate manner.
Why is a payment increasing the payable balance?!