Under the direct method, cash paid to suppliers can be computed as cost of goods sold for the period
A)plus an increase in inventory and minus an increase in accounts payable.
B)plus a decrease in inventory and minus an increase in accounts payable.
C)minus an increase in inventory and plus an increase in accounts payable.
D)minus a decrease in inventory and plus an increase in accounts payable.
E)None of these answer choices is correct.

Question

Quizplus · Accepted Answer

Under the direct method, cash paid to suppliers is calculated by taking the cost of goods sold, adding any increase in inventory (since more inventory means more cash spent), and subtracting any increase in accounts payable (since an increase in payables means less cash was paid out).

Under the Direct Method, Cash Paid to Suppliers Can Be