Question

In the financial statement for the year:Cost of goods sold during the year was $55,778. Inventories were $12,186 and $8,100 at the beginning and end of the year, respectively. Accounts payable (all owed to merchandise suppliers) were $5,923 and $3,825 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total is _____

Answer 1

To calculate the cash payments for merchandise, start with the cost of goods sold, adjust for the change in inventory, then adjust for the change in accounts payable. Using the provided figures, the cash payments for merchandise total is $57,766.

Step-by-step explanation:

Calculating Cash Payments for Merchandise

To calculate the cash payments for merchandise using the direct method of reporting cash flows from operating activities, we need to take into account the cost of goods sold (COGS), changes in inventory, and changes in accounts payable. Given the cost of goods sold during the year is $55,778, inventories are $12,186 at the beginning of the year and $8,100 at the end, and accounts payable to merchandise suppliers are $5,923 at the beginning and $3,825 at the end, the calculation is as follows:

• Begin with the COGS: $55,778.
• Adjust for the change in inventory level by subtracting the ending inventory from the beginning inventory ($12,186 - $8,100), giving us an adjustment of $4,086.
• Add the adjustment to COGS: $55,778 + $4,086 = $59,864. This represents the total merchandise purchased.
• Next, determine the change in accounts payable by subtracting the beginning accounts payable from the ending accounts payable ($5,923 - $3,825), which is $2,098.
• Finally, subtract the change in accounts payable from the total merchandise purchased to get the cash paid for merchandise: $59,864 - $2,098 = $57,766.

Therefore, the cash payments for merchandise total is $57,766.

Answer 2

The cash payments for merchandise total is calculated by adjusting the Cost of Goods Sold for changes in inventory and accounts payable. In this case, it is $62,962, which includes a decrease in inventory and an increase in accounts payable.

Step-by-step explanation:

To calculate cash payments for merchandise using the direct method of reporting cash flows from operating activities, we need to adjust the Cost of Goods Sold (COGS) for changes in inventory and accounts payable.

The formula is:

COGS + Decrease in Inventory - Increase in Accounts Payable = Cash Payments for Merchandise

We are given:

• COGS = $55,778
• Beginning Inventory = $12,186
• Ending Inventory = $8,100
• Beginning Accounts Payable = $5,923
• Ending Accounts Payable = $3,825

First, we calculate the decrease in inventory:

Beginning Inventory - Ending Inventory = $12,186 - $8,100 = $4,086

Next, we calculate the increase in accounts payable:

Ending Accounts Payable - Beginning Accounts Payable = $3,825 - $5,923 = -$2,098

Now we can determine the cash payments for merchandise:

$55,778 + $4,086 - (-$2,098) = $62,962

Hence, the cash payments for merchandise total is $62,962.