Cost of goods sold for the year was $660,000. Inventory was $83,000 at the beginning of the year and $37,000 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

Quizplus · Accepted Answer

Beginning inventory + Purchases - Ending inventory = Cost of goods sold
$83,000 + Purchases - $37,000 = $660,000
Purchases = $614,000
Cash payment for merchandise equals the cost of purchases plus any change in Accounts Payable. Since there were no changes in Accounts Payable, the cash payment would be $614,000. Therefore, the correct answer is B.

Cost of Goods Sold for the Year Was $660,000