The cost of goods sold during the year was $45,000. Inventories were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable (all owed to merchandise suppliers) were $7,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total
A) $46,000
B) $44,000
C) $50,000
D) $40,000

Question

Quizplus · Accepted Answer

Purchases during the year = Ending inventory + Cost of goods sold during the year - Beginning inventory = $10,500 + $45,000 - $13,500 = $42,000
Cash payments for merchandise = Beginning accounts payable + Purchases during the year - Ending accounts payable = $7,000 + $42,000 - $5,000 = $44,000

The Cost of Goods Sold During the Year Was $45,000