O'Hara Company uses the direct method to prepare the operating activities section of its statement of cash flows. The following information is available for Year 2. Inventory, January 1, Year 2$ 260,000Inventory, December 31, Year 2240,000Cost of goods sold during Year 2900,000Accounts payable, January 1, Year 2140,000Accounts payable, December 31, Year 2184,000Required:a) What amount of cash was paid for the purchase of merchandise?b) Using only this information, prepare the operating activities section of the statement of cash flows.
What will be an ideal response?
a) $836,000
Inventory sold$900,000
| Less: Decrease in inventory | (20,000) |
| Total merchandise purchased | 880,000 |
| Less: Increase in accounts payable | (40,000) |
| Total cash paid for merchandise | $836,000 |
b)
| Cash flow from operating activities | ? |
| Cash payment for inventory | $836,000 |
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