Question

​Tanglewood, Inc. uses the direct method to prepare its statement of cash flows. Refer to the following financial statement information for the year ended December​ 31, 2018:

​ Tanglewood, Inc.

Comparative Balance Sheet

December​ 31, 2018 and 2017

	2018	2017	Increase   ​(Decrease)
Cash	​$35,200	​$15,200	​$20,000
Accounts Receivable	​29,200	​36,200	​(7,000)
Merchandise Inventory	​53,600	​26,600	​27,000
​PP&E, net	​126,000	​92,000	​34,000
Total Assets	​$244,000	​$170,000	​$74,000
Accounts Payable	​8,900	​12,900	​$(4,000)
Accrued Liabilities	​6,100	​2,100	​4,000
Longminus−term Notes Payable	​71,000	​80,000	​$(9,000)
Total Liabilities	​$86,000	​$95,000	​$(9,000)
Common Stock	​$55,000	​$3,000	​$52,000
Retained Earnings	​115,000	​78,000	​37,000
Treasury Stock	​(12,000)	​(6,000)	​(6,000)
Total​ Stockholders' Equity	​$158,000	​$75,000	​$83,000
Total Liabilities and​ Stockholders' Equity	​$244,000	​$170,000	​$74,000

​ Tanglewood, Inc.

Income Statement

December​ 31, 2018

Sales Revenue	​$289,900
Interest Revenue	​2,400
Gain on Sale of Plant Assets	​6,000
Total Revenues and Gains		​$298,300
Cost of Goods Sold	​148,700
Salaries and Wages Expense	​46,600
Depreciation Expenselong dash—Plant Assets	​16,000
Other Operating Expense	​23,700
Interest Expense	​3,500
Income Tax Expense	​7,800
Total Expenses		​246,300
Net Income		​$52,000

Use the direct method to compute the payments to suppliers for Merchandise Inventory and other operating expenses.​ (Accrued Liabilities relate to other operating​ expense.)

A.

​$199,400

B.

​$19,700

C.

​$203,400

D.

​$179,700

Answer 1

Answer- The payments to suppliers for Merchandise Inventory and other operating expenses = $199400 (Option A).

Explanation- Payments to suppliers for Merchandise Inventory and other operating expenses

= $179700+$19700

= $199400

Payments to suppliers for Merchandise Inventory = Merchandise inventory purchased+ Opening accounts payable balance- Closing accounts payable balance

= $175700+$12900-$8900

= $179700

Where = Merchandise inventory purchased =$175700

Cost of goods sold = Opening Merchandise inventory+ Purchases- Closing Merchandise inventory

$148700 = $26600+ Purchases-$53600

Purchases = $148700+$53600-$26600

= $175700

Payments to other operating expenses= Other operating expenses+ Opening accrued liabilities- Closing accrued liabilities

= $23700+$2100-$6100

= $19700