The cost of goods sold during the year was $183,000. Inventory decreased by $8,000 during the year and accounts payable decreased by $4,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total
A) $187,000.
B) $179,000.
C) $171,000.
D) $195,000.

Question

Quizplus · Accepted Answer

The formula for calculating cash payments for merchandise using the direct method is:

Cost of Goods Sold + Beginning Inventory - Ending Inventory + Decrease in Accounts Payable = Cash Payments for Merchandise

Plugging in the given values, we get:

$183,000 + $8,000 - $0 - (-$4,000) = $179,000

Therefore, the answer is B.

The Cost of Goods Sold During the Year Was $183,000