Refer to the information presented for Diatessaron Inc. in P17–11A — All purchases inventory are credit — Accounts payable used only record

Less: Increase in accounts receivable (26,000)

$637,000

(2) Cash receipts from interest

Interest revenue $4,500

Add: amortization of premium on long-term

debt investment** 500

$5,000

(3) Cash payments to suppliers

Cost of goods sold $432,000

Add: Increase in inventory 49,500

Cost of goods purchased 481,500

Less: Increase in accounts payable (10,500)

$471,000

(4) Cash payments for operating expenses

Operating expenses $147,500

Less: Depreciation expense* (43,500)

$104,000

(5) Cash payments for income tax

Income tax expense $14,000

Add: Decrease in income tax payable 1,000

$15,000

(6) Cash from sale of equipment

Carrying amount of equipment $9,000

Less: Loss on sale (3,000)

Cash received $6,000

* Depreciation expense

Accumulated depreciation, end of year $162,500

Plus: Accumulated depreciation of equipment

sold ($30,000 − $9,000) 21,000

Accumulated depreciation, beg. of year (140,000)

Depreciation expense $43,500

** Non-cash interest revenue on long-term debt investment

Long-term debt investment, end of year $101,500

Less: Purchase price (102,000)

Premium amortization $ (500)

Taking It Further:

Accounts payable can arise from various expenditures. The information that accounts payable is used for purchases is necessary to calculate cash payments to suppliers. Accounts payable can also relate to operating expenses and the information is necessary to properly match the accrual to the related expense. If payments to suppliers and payments for operating expenses are grouped together on the cash flow statement, the information would not be necessary.