Detailed Answer
Answer (A) is correct. Cost of goods sold equals beginning inventory, plus purchases, minus ending inventory. To determine cost of goods sold, purchases must be calculated. Purchases equal $167,000 ($49,000 ending accounts payable + $180,000 payments to suppliers – $62,000 beginning accounts payable). Thus, cost of goods sold equals $147,000 ($120,000 beginning
inventory + $167,000 purchases – $140,000 ending inventory).