Arch Associates reports the following comparative balance sheets and income statement information. Arch Associates Comparative Balance Sheets 12/31/Year 1 12/31/Year 2 Cash $12,000 $22,000 Accounts receivable 4,000 8,000 Prepaid insurance 10,000 8,000 Inventory 6,000 2,000 Property, plant and equipment 12,000 10,000 Total assets $44,000 $50,000 Accounts payable $8,000 $12,000 Salaries payable 10,000 4,000 Long term notes payable 8,000 6,000 Stockholders' equity 18,000 28,000 Total liabilities and equity $44,000 $50,000 Income StatementYear Ended 12/31/Year 2Revenue$70,000 Cost of goods sold 40,000 Gross margin 30,000 Operating expense 20,000 Net
income$10,000 All inventory purchases are made on account. The amount of cash paid for inventory purchases during Year 2 was:
A. $36,000.
B. $40,000.
C. $32,000.
D. $22,000.
Answer: C
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