Cost of goods sold for the year was $850,000. Inventory was $60,000 at the beginning of the year and $90,000 at the end of the year. There were no changes in the amount in account payable for the year. Cash payment for merchandise to be reported under the direct method is:

Question

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The cash payment for merchandise is calculated by adjusting the cost of goods sold for the change in inventory. The increase in inventory is $30,000 ($90,000 - $60,000). Therefore, cash payment is $850,000 (COGS) + $30,000 (increase in inventory) = $880,000.

Cost of Goods Sold for the Year Was $850,000