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

Question

Quizplus · Accepted Answer

With the direct method, the amount of cash purchases of inventory is computed by taking the cost of goods sold and adding the change in inventory. Specifically, it is calculated as cost of goods sold plus ending inventory minus beginning inventory. This reflects the actual cash outflow for purchasing inventory during the period.

A Company Uses the Direct Method to Prepare the Statement