Question 10 of reading 27, I think there was a similar example in the reading, but why do we use COGS to calculate how much cash was paid to suppliers? Is it because inventory is generally considered a short term asset? So generally you would be buying and selling the inventory within a year?
We paid cash to suppliers for input product that was eventually sold. Since its no longer included in inventory, we need a way to measure those costs.
COGS is the *cost* of goods sold not ending in the inventory balance. Add in the change in payables and inventory value and we get cash costs to suppliers.