Question

Cost of goods sold during the year was $183,000. During the year, merchandise inventory decreased by $8,000, prepaid expenses increased by $1,000, and accounts payable decreased by $4,000. Based upon this and using the direct method of reporting cash flows from operating activities, cash payments to suppliers total Select one: a. $187,000. b. $179,000. c. $188,000. d. $180,000. e. $186,000.

Answer 1

Answer:

The correct option is B

Explanation:

In this question, we are asked to calculate the cash payment to suppliers total.

To calculate this, we employ a mathematical approach.

Mathematically;

Cash Payment to supplier

= cost of goods sold - decrease in inventory +decrease in account payable

From the question, we identify;

Cost of goods sold = $183,000

Decrease in inventory =$8,000

Decrease in account payable =$4,000

Plugging these values in the equation, we have;

Cash payment to supplier = 183000 - 8000+4000

= $ 179000

Answer 2

Answer:

e. $186,000.

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.  

The cash flow may be represented using the direct or indirect method.

The decrease in inventory is a cash inflow while the decrease in accounts payable and the increase in prepaid expenses are cash outflows.

Cash payments to suppliers total

= $183,000 + $8000 - $4000 -$1000

= $186,000