During the year, Salaries Payable decreased by $12,000. Using the direct method of reporting cash flows from operating activities, if Salary Expense amounted to $400,000 for the year, the cash paid to employees (including deductions from gross pay) is
A) $412,000.
B) $388,000.
C) $400,000.
D) $404,000.

Question

Quizplus · Accepted Answer

The decrease in Salaries Payable indicates that more cash was paid than the salary expense recorded. Therefore, cash paid to employees is the salary expense plus the decrease in Salaries Payable: $400,000 + $12,000 = $412,000.

During the Year, Salaries Payable Decreased by $12,000