Answer the following statements true (T) or false (F)
1. Payments to suppliers include items such as employee compensation, interest and income taxes.
2. Cash payments for inventory are computed as– Total inventory purchased plus a decrease in Accounts Payable OR minus an increase in Accounts Payable.
3. Tumbler, Inc. reports cost of goods sold $65,000, an increase in inventory of $12,000 and an increase in accounts payable of $8,000. Cash paid for inventory was $69,000.
4. Cougs Co. reports cost of goods sold $40,000, an increase in inventory of $15,000 and a decrease in accounts payable of $5,000. Cash paid for inventory was $50,000.
5. Over time, if the cash conversion cycle for a business grows longer, this is an indication that they are holding cash too long.
1. FALSE
2. TRUE
3. TRUE
Explanation: COGS + increase inventory - increase A/P; ex: $65,000 + $12,000 - $8,000 = $69,000
4. FALSE
Explanation: False, because COGS + increase inventory + decrease A/P; ex: $40,000 + $15,000 + $5,000 = $60,000
5. FALSE
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