Prevous Page 6 of 11 ml Next for the year were $300,000. Accrued expenses decrea

Question

Prevous Page 6 of 11 ml Next for the year were $300,000. Accrued expenses decreased by $30,000 during the year Cash paryments for operating expenses to be reported on the cash now statement using the direct method would be ng expenses oter than deprecanon pas any decrease n current habites or minus an increase in current liabines or S300.000 + .000 $330,000 O b operaling expenses other than depreciation or $300,000 Oc operating expenses other than depreciation minus any decrease in current sabilities or $300,000-$30.000 $270,000 o d accrued expenses of s30,000 o

Explanation / Answer

1) Operating expenses other than depreciation for the year were $300,000. Accrued expenses decreased by $30,000 during the year. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be

Solution: operating expenses other than depreciation plus any decrease or minus an increase in current liabilities or $300,000 + $30,000 = $330,000

Working: Cash paid for operating expenses would be operating expenses on the income statement, other than depreciation, add any decrease in current liabilities and in this scenario the current liabilities reduced so the change is added, thus $300,000 + $30,000 = $330,000

2) Income tax was $200,000 for the year. Income tax payable was $30,000 and $40,000 at the beginning and end of the year respectively. Cash payments for income tax reported on the cahs flow statement for the direct method is

Solution: $190,000

Working: $200,000 + $30,000 - $40,000

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