Question

Ash Company reported cost of goods sold of $875,000 for the year. Ash has also provided the following information: Ash prepares its statement of cash flows using the indirect method Inventory Accounts Payable Balance - beginning of year 69,000 107,000 balance - end of year 83,000 92,000 What amount of cost of goods sold should Ash report as a supplement disclosure of cash flow information

A. 14,000
B. 904,000
C. 889,000
D. 15,000

Answer 1

B. 904,000

Step-by-step explanation:

Ash Company should report as supplemental information the amount of cash paid to suppliers = cost of goods sold + increase in inventory + decrease in accounts payable

cash paid to suppliers = $875,000 + ($83,000 - $69,000) + ($107,000 - $92,000) = $875,000 + $14,000 + $15,000 = $904,000

Apparently Ash Company buys and then resells goods, which means that one of its largest cash outflows should be suppliers. That is why it should provide supplemental information about cash paid to them.