A company uses the direct method to prepare the statement of cash flows.How will the amount of cash payments to suppliers be computed?

Question

Quizplus · Accepted Answer

When using the direct method, the amount of cash payments to suppliers is computed as purchases minus the increase in accounts payable. This is because purchases of inventory are the main source of payments to suppliers, and changes in accounts payable represent the timing difference between the purchase and the actual payment.

A Company Uses the Direct Method to Prepare the Statement