Question

Park Place Company reported salaries expense of $100,000 for the year 2020. Park Place also reported salaries payable of $18,000 and $12,000 on January 1, 2020, and December 31, 2020, respectively. What amount would be reported as cash paid to employees in the operating activities section of the statement of cash flows using the direct method?

Answer 1

The cash paid to employees, subtract the beginning salaries payable from the salaries expense and add the ending salaries payable. The calculation is: $100,000 (Salaries Expense) - $18,000 (Beginning Salaries Payable) + $12,000 (Ending Salaries Payable) = $94,000 cash paid to employees.

Step-by-step explanation:

To calculate the amount of cash paid to employees during the year 2020, you would need to adjust the salaries expense reported on the income statement by the change in salaries payable account on the balance sheet.


The reported salaries expense for Park Place Company is $100,000 for the year 2020.

• Begin with the salaries expense reported: $100,000.
  
  
• Subtract the beginning salaries payable (from January 1, 2020): -$18,000.
  
  
• Add the ending salaries payable (from December 31, 2020): +$12,000.

The resulting cash paid to employees can be calculated as follows: Salaries Expense - Beginning Salaries Payable + Ending Salaries Payable = Cash Paid to Employees.

Cash Paid to Employees = $100,000 - $18,000 + $12,000

Cash Paid to Employees = $94,000

This is the amount that would be reported as cash paid to employees in the operating activities section of the statement of cash flows using the direct method.