Tito Company reports a $20,000 increase in inventory and a $5,000 decrease in accounts payable during the year.Cost of Goods Sold for the year was $282,000.Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were
A)$282,000.
B)$262,000.
C)$307,000.
D)$257,000.

Question

Quizplus · Accepted Answer

To calculate cash payments to suppliers using the direct method, adjust the Cost of Goods Sold (COGS) by changes in inventory and accounts payable. Start with COGS of $282,000, add the $20,000 increase in inventory (indicating more cash spent on inventory), and add the $5,000 decrease in accounts payable (indicating more cash paid to suppliers). Thus, cash payments to suppliers = $282,000 + $20,000 + $5,000 = $307,000.

Tito Company Reports a $20,000 Increase in Inventory and a $5,000