# Cash payments for merchandise—direct method The cost of merchandise sold reported on the income statement was $240,000. The accounts payable balance increased$12,000, and the inventory balance increased by $19,200 over the year. Determine the amount of cash paid for merchandise. BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 #### Solutions Chapter Section Chapter 16, Problem 16.7BPE Textbook Problem ## Cash payments for merchandise—direct methodThe cost of merchandise sold reported on the income statement was$240,000. The accounts payable balance increased $12,000, and the inventory balance increased by$19,200 over the year. Determine the amount of cash paid for merchandise.

Expert Solution
To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Direct method: This method uses the basis of cash for preparing the cash flows statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

The below table shows the way of calculation of cash flows from operating activities:

 Cash flows from operating activities (Direct method) Add: Cash receipts. Cash receipt from customer Less: Cash payments: To supplier For operating expenses Income tax expenses Net cash provided from or used by operating activities

To Determine: The amount of cash paid for merchandise.

### Explanation of Solution

Cash payments for purchase represents the total amount of cash paid for the purch...

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