Lager Company has other operating expenses of $260000. There has been an increase in prepaid expenses of $20000 during the year and accrued liabilities are $15000 lower than in the prior period. Using the direct method of reporting cash flows from operating activities what were Lager's cash payments for operating expenses?
A) $255000
B) $265000
C) $225000
D) $295000

Question

Quizplus · Accepted Answer

The cash payments for operating expenses are calculated by adjusting the operating expenses for changes in prepaid expenses and accrued liabilities. The increase in prepaid expenses ($20,000) is added to the operating expenses, and the decrease in accrued liabilities ($15,000) is also added. Thus, $260,000 + $20,000 + $15,000 = $295,000.

Lager Company Has Other Operating Expenses of $260000