Last year Anderson Corporation reported a cost of goods sold of $101,000. The company's inventory at the beginning of the year was $11,200, and its inventory at the end of the year was $19,300. The prepaid expense account increased by $2,100 between the beginning and end of the year, and the accounts payable account decreased by $4,100. Cost of goods sold adjusted to the cash basis under the direct method would be:

Cost of goods sold adjusted to the cash basis under the direct method would be: $113,200.

First step is to calculate the Net purchases

Net purchases = Cost of goods sold + (Ending inventory - Beginning inventory)

Net purchases = $101,000 + ($19,300 - $11,200)

Net purchases =$101,000+$8,100

Net purchases =$109,100

Second step is to calculate adjusted Cost of good sold

Adjusted Cost of good sold=$109,100+$4,100

Adjusted Cost of good sold=$113,200

Inconclusion the cost of goods sold adjusted to the cash basis under the direct method would be: $113,200.

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$113,200

Explanation:

Data provided

Cost of goods sold = $101,000

Increase in Inventory = $8,100

Decrease in Accounts payable = $4,100

The calculation of Adjusted cost of goods sold is shown below:-

Adjusted cost of goods sold = Cost of goods sold + Increase in Inventory + Decrease in Accounts payable

= $101,000 + $8,100 + $4,100

= $113,200

Therefore for computing the adjusted cost of goods sold we simply applied the above formula.

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