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    Purchase of merchandise

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    The following information is available for K Co. for 2005.
    Inventory 1/1/05 130,000
    Inventory 12/31/05 120,000
    Cost of Goods Sold, 2005 450,000
    Accounts Payable 1/1/05 70,000
    Accounts Payable 12/31/05 92,000

    (A) What amount of cash was paid for the purchase of merchandise?
    (B) How will the amount computed in (a) be shown of the statement of cash flows?

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    Solution Preview

    A. The cash paid for purchase of merchandise is computed as
    Cash payments for inventory:
    Cost of Sales 450,000
    +Ending Inventory 120,000

    Solution Summary

    This solution explains how to calculate the amount paid for the purchase of merchandise and how it will be shown in the statement of cash flows.