Qtopia Electric Company uses the direct method to prepare its statement of cash flows.Qtopia has reported cost of goods sold of $85,000 on its income statement for 2017.If the balance in Accounts Payable,for merchandise inventory suppliers only,has decreased by $8,000 during the year,then $8,000 needs to be subtracted from $85,000 to calculate payments to suppliers for merchandise inventory purchases.

Question

Quizplus · Accepted Answer

The decrease in Accounts Payable means that less money was paid to suppliers for merchandise inventory purchases. Therefore, the amount to be subtracted from cost of goods sold would be less, not more. $8,000 should be added to cost of goods sold to calculate payments to suppliers for merchandise inventory purchases.

Qtopia Electric Company Uses the Direct Method to Prepare Its