Cost of goods sold

1. Company A’s inventory decreased by $10,000 during the period, while its accounts payable for inventory increased by $6,000. Which is greater, cost of goods sold or cash paid for inventory? Why?

2. If the interest expense for the period is $1,500 and the Premium on Bonds Payable account decreases during the period by $50, how much is the cash paid for interest? Why?

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1. In the indirect method of presenting operating cash flows, why is net income adjusted for depreciation, depletion, and amortization?

2. If a bond payable is issued at a discount, is the resulting amortization added to, or deducted from, net income to determine cash flows from operations in the indirect method? Why?

1. If a bond payable is issued at a premium, is the resulting amortization added to, or deducted from, net income to determine cash flows from operations in the indirect method? Why?

2. When the indirect method is used for the statement of cash flows, how and why is net income affected by changes in current operating assets to determine cash flows from operations?

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