Cash Payments—Direct Method Wolf\'s comparative balance sheets included inventor

Question

Cash Payments—Direct Method

Wolf's comparative balance sheets included inventory of $44,000 at December 31, 2013, and $57,000 at December 31, 2014. The comparative balance sheets also included accounts payable of $33,000 at December 31, 2013, and $39,000 at December 31, 2014. Wolf's accounts payable balances are composed solely of amounts due to suppliers for purchases of inventory on account. Cost of goods sold, as reported on the 2014 income statement, amounted to $120,000.

What is the amount of cash payments for inventory that Wolf will report in the Operating Activities section of its 2014 statement of cash flows assuming that the direct method is used?

$

Explanation / Answer

Inventory at beginning of Year = $ 44000

Closing Inventory = $57000

Cost of Goods Sold = $120000

Inventory Purchased during Year = 120000+57000-44000 = $133000.

Now , this inventory purchased will be done solely from Accounts payable.

Opening Accounts payable = $ 33000

Closing Accounts payable = $39000

Accounts payable during the year = $133000

Cash payments for inventory that Wolf will report in the Operating Activities section of its 2014 statement of cash flows assuming that the direct method is used would be   

= 133000+33000-39000 = $127000

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