Avatar Company Uses the Direct Method to Prepare Its Statement

question 117

Multiple Choice

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following information reported for the year 2014:
$\begin{array}{lr}\text { Cost of goods sold } & \$ 110,000 \\\text { Inventory beginning balance: } & \$ 25,000 \\\text { Inventory ending balance: } & \$ 53,000 \\\text { Accounts payable beginning balance: } & \$ 6,000 \\\text { Accounts payable ending balance: } & \$ 4,000\end{array}$
What amount was paid to suppliers for inventory purchases on a cash basis?

• A) $140,000
• B) $136,000
• C) $80,000
• D) $82,000

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Definitions:

Total Liabilities

The sum of all financial obligations (debts) owed by a company to external parties, recorded on its balance sheet.

Unsecured

Refers to loans or debts that are not backed by collateral, relying on the borrower's creditworthiness instead.

Payroll Taxes Payable

Taxes owed to the government by an employer, based on employee wages, that have been incurred but not yet paid.

Financial Affairs

The management and administration of monetary activities, investments, and financial strategies of an individual or organization.