The Cost of Goods Sold During the Year Was $45,000

question 160

Multiple Choice

The cost of goods sold during the year was $45,000. Inventories were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable (all owed to merchandise suppliers) were $7,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

• A) $46,000
• B) $44,000
• C) $50,000
• D) $40,000

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Definitions:

Amortization Assumption

The accounting practice of gradually writing off the initial cost of an intangible asset over its useful life.

Interest Expense

The cost incurred by an entity for borrowed funds; interest payments made on any form of debt over a given period.

Effective Interest Method

An accounting practice used to allocate loan discounts or premiums over the life of the loan, reflecting the financial interest rate more accurately.

Discount Amortization

The process of gradually reducing the discount on bonds payable or notes payable over the life of the debt.