Operating expenses other than depreciation expense for the year were $30,500. Prepaid expenses increased by $9,400. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Question

Quizplus · Accepted Answer

When using the direct method for the cash flow statement, adjustments are made for changes in working capital accounts to calculate cash payments or receipts. The increase in prepaid expenses (a current asset) means that more cash was paid out than the expense recognized in the income statement. Therefore, to find the cash payments for operating expenses, you add the increase in prepaid expenses ($9,400) to the operating expenses other than depreciation ($30,500), totaling $39,900.

Operating Expenses Other Than Depreciation Expense for the Year Were