Jump Company Uses the Direct Method to Prepare Its Statement

question 68

Multiple Choice

Jump Company uses the direct method to prepare its statement of cash flows. Refer to the following information reported for 2019:
Cost of Goods Sold, $150,000
Merchandise Inventory, beginning balance, $30,000
Merchandise Inventory, ending balance, $60,000
Accounts Payable, beginning balance, $8100
Accounts Payable, ending balance, $5000
Operating expenses, $28,000
Accrued Liabilities, beginning balance, $2900
Accrued Liabilities, ending balance, $6200
Use the direct method to compute the cash paid to suppliers. (Accrued Liabilities relate to operating expenses.)

• A) $158,000
• B) $158,400
• C) $183,100
• D) $207,800

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Definitions:

Equivalent Unit

A measure used in cost accounting to express the amount of work done on inventory units in terms of fully completed units.

First-in

First-in, often associated with the accounting method "First-In, First-Out" (FIFO), refers to the principle that the first items added to an inventory are the first ones to be used or sold.

Conversion Costs

The sum of labor costs and overhead expenses associated with transforming raw materials into finished goods.

Equivalent Units

Equivalent units are a concept used in cost accounting to express the amount of work completed in terms of fully finished units, especially in processes involving partial completion of units.