cost of goods sold (COGS), which appears on the income statement, is a measure of “inventory out”—in other words, the number of units sold times the cost of each unit. Second, cash paid to suppliers—inventory paid, on the cash-flow statement—shows how much a company actually spent to increase its inventory. The net of those two numbers explains the difference in year-end inventory. Beginning inventory of $75,000 minus COGS of $350,000 (inventory out—that’s why it’s minus) plus inventory paid of $380,000 equals ending inventory of $105,000. In other words, $30,000 more inventory came in than
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