Question

Ale Company has other operating expenses of $80,000. There has been a decrease in prepaid expenses of $6,000 during the year, and accrued liabilities are $5,000 larger than in the prior period. What were Ale's cash payments for operating expenses?

A) $81,000
B) $82,000
C) $69,000
D) $80,000

Answer 1

To calculate Ale's cash payments for operating expenses, subtract the decrease in prepaid expenses and add the increase in accrued liabilities. The correct cash payment is $79,000, which corresponds to option D.

Step-by-step explanation:

To calculate Ale's cash payments for operating expenses, we need to consider the changes in prepaid expenses and accrued liabilities.

1. 
   
3. Prepaid expenses decreased by $6,000, meaning that Ale had paid $6,000 less for expenses in the current period compared to the prior period. This amount is subtracted from other operating expenses.
4. 
   
6. Accrued liabilities increased by $5,000, indicating that Ale owed $5,000 more in expenses in the current period compared to the prior period. This amount is added to other operating expenses.

Therefore, the cash payments for operating expenses can be calculated as follows:

Cash payments for operating expenses = Other operating expenses - decrease in prepaid expenses + increase in accrued liabilities

Given that other operating expenses are $80,000, the decrease in prepaid expenses is $6,000, and the increase in accrued liabilities is $5,000, we can calculate:

Cash payments for operating expenses = $80,000 - $6,000 + $5,000 = $79,000.

Thus, the correct option is D) $80,000.