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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Smoltz Company reported the following information for the current year: cost of goods sold, $252,500; increase in inventory, $21,700; and increase in accounts payable, $12,200. What is the amount of cash paid to suppliers that Smoltz would report on its statement of cash flows under the direct method?

a. $218,600 c. $262,000

b. $243,000 d. $286,400

To determine

Introduction:

A company pays its supplier for inventory which it later sells to customer as represent by cost of goods sold. These purchased of inventory from suppliers may be either cash purchased,or credit purchase reflected as accounts payable. To compute cash paid to suppliers, it is necessary to analyze two accounts inventory and accounts payable.

To choose:

What is the amount of cash paid to suppliers that Smoltz would report on its statement of cash flows under the direct method.

Explanation

Explanation for correct answers:

Cost of purchase = Cost of goods sold + increase in inventory

=$252500+$21700=$274200

Cash paid to supplier = cost of purchase − i

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