Question

Donnegan Company reported operating expenses of $325,000 for 2020. The following data were extracted from the company’s financial records: 12/31/19 12/31/20 Prepaid Expenses $ 60,000 $69,000 Accrued Expenses 210,000 255,000 Accounts Payable 300,000 350,000 On a statement of cash flows for 2020, using the direct method, cash payments for operating expenses should be:___________.

Answer 1

cash payments for operating expenses should be $329,000

Step-by-step explanation:

Cash Payments for operating expenses is included in the Cash Flow from Operating Activity Section of the Statement of Cash Flows when the Direct Method of preparing this statement is selected.

This is calculated as follows :

Cash Payments for operating expenses

Operating expenses $325,000

Adjustment of changes in Working Capital

Increase in Prepaid Expenses ($69,000 - $ 60,000) $9,000

Increase in Accrued Expenses ($255,000 - $210,000) $45,000

Increase in Accounts Payable ($350,000 - $300,000) ($50,000)

Cash payments for operating expenses $329,000