Block Food’s, a retail grocery store, has agreed to purc
Question and Solution
Block Food’s, a retail grocery store, has agreed to purchase all of its merchandise from Square Wholesalers. In return, Block receives a special discount on purchases. Over recent months, Square noticed that purchases by Block had been falling off. At first, Square simply thought that business might be down for Block and was hopeful that their purchases would pick up. When business with Block did not return to a normal level, Square requested financial statements from Block. Square’s records indicate that Block purchased $300,000 worth of merchandise during 20-1, the most recent year. Selected information taken from Block’s financial statements is as follows: Balance Sheet .. 12/31/-1 . 12/31/-0 Inventory .. $30,000 .. $20,000 Income Statement Cost of goods sold ...... $400,000 REQUIRED Compute net purchases made by Block during 20-1. Does it appear that Block violated the agreement?