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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 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.

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

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