The cost of merchandise sold during the year was $50 000.Merchandise inventories were $11 500 and $9500 at the beginning and end of the year,respectively.Accounts payable were $5000 and $4000 at the beginning and end of the year,respectively.Using the direct method of reporting cash flows from operating activities,cash payments for merchandise would total:

Question

Quizplus · Accepted Answer

The correct answer is A.The direct method of reporting cash flows from operating activities requires that cash payments for merchandise be reported as a separate line item on the statement of cash flows. The formula for calculating cash payments for merchandise is:Beginning merchandise inventory + Purchases - Ending merchandise inventory = Cash payments for merchandiseIn this case, the beginning merchandise inventory is $11,500, the purchases are $50,000, and the ending merchandise inventory is $9,500. Therefore, the cash payments for merchandise are $49,000.

The Cost of Merchandise Sold During the Year Was $50