E-TEST m #1 of 11 The cost of merchandise sold during the year was $54,000. Merchandise inventories increased by $2,000. Accounts payable increased by $3,000. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise are calculated a. by taking the cost of merchandise sold plus an increase in merchandise inventory or minus a decrease in merchandise inventory, and plus a decrease in accounts payable or plus an increase in accounts payable. b. by taking the cost of merchandise sold plus an increase in merchandise inventory or plus a decrease in merchandise Inventory, and plus a decrease in accounts payable or minus an increase in accounts payable. c. by taking the cost of merchandise sold plus an increase in merchandise inventory or minus a decrease in merchandise inventory, and plus a decrease in accounts payable or minus an increase in accounts payable. d. by taking the cost of merchandise sold minus an increase in merchandise inventory or minus a decrease in merchandise inventory, and plus a decrease in accounts payable or minus an increase in accounts payable.

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19-12-2022
Business

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E-TEST m #1 of 11 The cost of merchandise sold during the year was $54,000. Merchandise inventories increased by $2,000. Accounts payable increased by $3,000. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise are calculated a. by taking the cost of merchandise sold plus an increase in merchandise inventory or minus a decrease in merchandise inventory, and plus a decrease in accounts payable or plus an increase in accounts payable. b. by taking the cost of merchandise sold plus an increase in merchandise inventory or plus a decrease in merchandise Inventory, and plus a decrease in accounts payable or minus an increase in accounts payable. c. by taking the cost of merchandise sold plus an increase in merchandise inventory or minus a decrease in merchandise inventory, and plus a decrease in accounts payable or minus an increase in accounts payable. d. by taking the cost of merchandise sold minus an increase in merchandise inventory or minus a decrease in merchandise inventory, and plus a decrease in accounts payable or minus an increase in accounts payable.

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PallaviB PallaviB · Answer 1 · 2022-12-25T05:55:54+01:00

The correct answer is C .The cash payments for merchandise are calculated by taking the cost of merchandise sold plus an increase in merchandise inventory or minus a decrease in merchandise inventory, and plus a decrease in accounts payable or minus an increase in accounts payable.

The direct method of reporting cash flows from operating activities is based on actual cash flows and does not use accrual accounting principles. This equation is used to calculate the cash paid for merchandise, as the cost of merchandise sold is the amount paid for the items sold.

The change in merchandise inventory is the difference between the beginning and ending inventory, while the change in accounts payable is the difference between the beginning and ending accounts payable. By adding or subtracting the changes in inventory and accounts payable, the amount of cash paid for the merchandise is calculated.

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