Question

True or False: To determine cash payments for merchandise for the statement of cash flows using the direct method, a decrease in accounts payable is added to the cost of goods sold. (Assume all accounts payable are owed to merchandise suppliers.)

Answer 1

True

Step-by-step explanation:

While preparing a cash flow statement under direct method, the decrease in accounts payable balance is added to cost of goods sold, as this leads to increase in cost of goods sold.

As, opening accounts payable will be part of cost of goods sold and closing will be deducted.

Thus, on a net effect when there is a decrease in value of accounts payable that decrease is added to cost of goods sold.

Therefore the statement given in question is true.