Total operating expenses on Tucker Company's income statement for last year totaled $215,000. During the year the accounts payable stayed the same, the accrued liabilities stayed the same, and prepaid expenses stayed the same. Depreciation expense for the year was $11,000. Based on this information, operating expenses adjusted to cash basis under the direct method on the statement of cash flows would be

Question

Quizplus · Accepted Answer

The adjusted operating expenses under the direct method are calculated by adding back the non-cash expenses (in this case depreciation) and adjusting for changes in current assets and liabilities. As the accounts payable, accrued liabilities, and prepaid expenses do not change, they do not need to be adjusted. Therefore, the adjusted operating expenses would be the total operating expenses minus depreciation, which equals $204,000 ($215,000 - $11,000).

Total Operating Expenses on Tucker Company's Income Statement for Last