Caldwell Corp.'s cost of goods purchased amounts to $900,000 for 2011. From the beginning until the end of 2011, their accounts payable decreased by a net amount of $95,000. How much "cash outflows for purchases" should Caldwell report for 2011 on their statement of cash flows?

Question

Quizplus · Accepted Answer

The cash outflows for purchases can be calculated by adding the decrease in accounts payable to the cost of goods purchased. If accounts payable decreased by $95,000, it means Caldwell Corp. paid more to its suppliers than the purchases recorded. Therefore, $900,000 (cost of goods purchased) + $95,000 (decrease in accounts payable) = $995,000 is the cash outflow for purchases.