The changes in Northrup Corporation's balance sheet account balances for last year appear below: The company's income statement for the year appears below:
The company declared and paid $28,000 in cash dividends during the year. It did not dispose of any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by (used in) operating activities.On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be:
A) $546,000
B) $536,000
C) $544,000
D) $540,000

Question

The changes in Northrup Corporation's balance sheet account balances for last year appear below:  The company's income statement for the year appears below:
 The company declared and paid $28,000 in cash dividends during the year. It did not dispose of any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by (used in) operating activities.On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be:
A) $546,000 
B) $536,000 
C) $544,000 
D) $540,000

Quizplus · Accepted Answer

To calculate the cost of goods sold on a cash basis, we need to adjust the changes in inventory and accounts payable from the accruals basis to the cash basis. Therefore, we start with cost of goods sold of $550,000 and add the increase in inventory of $10,000 and subtract the decrease in accounts payable of $16,000. This gives us a cost of goods sold adjusted to a cash basis of $544,000.

The Changes in Northrup Corporation's Balance Sheet Account Balances for Last