[26] Baler Co. prepared its statement of cash flows at year-end using the direct method. The following amounts were used in the computation of cash flows from operating activities: Beginning inventory $200,000 Ending inventory 150,000 Cost of good sold 1,200,000 Beginning accounts payable 300,000 Ending accounts payable 200,000 What amount should Baler report as cash paid to suppliers for inventory purchases?
A. $1,200,000
B. $1,250,000
C. $1,300,000
D. $1,350,000

Question

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stokholm stokholm · Answer 1 · 2019-09-06T06:59:56+02:00

Answer:

B. $1,250,000

Explanation:

We know that,

Opening Inventory + Purchases during the year - Closing Inventory = Cost of goods sold

Now putting values in above we have,

$200,000 + Purchases - $150,000 = $1,200,000

Purchases = $1,200,000 + $150,000 - $200,000 = $1,150,000

Also Cash paid to suppliers for inventory purchases = Opening accounts payable + Purchases - Closing payable

= $300,000 + $1,150,000 - $200,000 = $1,250,000

Therefore, correct option is

B. $1,250,000