Last Year Madson Company Reported a Cost of Goods Sold

question 6

Multiple Choice

Last year Madson Company reported a cost of goods sold of $800,000 on its income statement. The following additional data were taken from the company's comparative balance sheet for the year:
The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be:

• A) $830,000
• B) $810,000
• C) $770,000
• D) $790,000

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Definitions:

Cost of Goods Sold

The expenses directly tied to the creation of the products sold by a business.

Collections

The process of pursuing payments of debts owed by individuals or businesses, typically involving accounts receivable.

Accounts Receivable

The money owed to a company by its customers for goods or services delivered but not yet paid for.

Credit Sales

Sales made by a business where payment is deferred, allowing the customer to pay at a later date.