Gladiator Ltd uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2016: Cost of sales,$132,000
Inventory,beginning balance,$26,000
Inventory,ending balance,$65,000
Accounts payable,beginning balance,$7900
Accounts payable,ending balance,$5400
What is the amount of cash paid for inventory?
A)$173,500
B)$93,000
C)$168,500
D)$171,000

Question

Quizplus · Accepted Answer

The cash paid for inventory is calculated as the sum of the beginning inventory, purchases, and ending inventory, less the sum of the beginning accounts payable and ending accounts payable. In this case, the cash paid for inventory is $132,000 + $26,000 + $65,000 - $7,900 - $5,400 = $173,500.

Gladiator Ltd Uses the Direct Method to Prepare Its Cash