Tracy company reports the following in its statement of cash flows:
Net Income $1,000 -
Depreciation and Amortization 350
Decrease (Increase) in Accounts receivable (10)
Decrease (increase) in inventory 200
Decrease (increase) in prepaid expenses 80
Increase (decrease) in trade payables (300)
Increase (decrease) in taxes payable 75
Cash Flow from operations 1,395 -
If Tracy shows cost of goods sold of $2,050 on its income statement, cash paid to suppliers is
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A. B. C. D.D
$2,050 - $200 (purchased $200 less than used) + 300 (paid more to suppliers.
To determine the cash paid to suppliers, we need to consider the changes in inventory and trade payables, as well as the cost of goods sold.
The cost of goods sold represents the direct cost of producing the goods that were sold during the period. It is typically calculated as the opening inventory plus purchases minus the closing inventory. In this case, the cost of goods sold is given as $2,050.
Let's analyze the given information step by step:
Increase (decrease) in inventory: The statement of cash flows shows a decrease in inventory of $200. This means that the inventory decreased by $200 during the period.
Increase (decrease) in trade payables: The statement of cash flows shows an increase in trade payables of $300. This means that the trade payables increased by $300 during the period.
To calculate the cash paid to suppliers, we need to adjust the cost of goods sold for the changes in inventory and trade payables. The formula is:
Cash paid to suppliers = Cost of goods sold + Increase in inventory - Increase in trade payables
Plugging in the values we have:
Cash paid to suppliers = $2,050 + (-$200) - $300 Cash paid to suppliers = $2,050 - $200 - $300 Cash paid to suppliers = $1,550
Therefore, the correct answer is B. $1,550.