Van Beeber Corporation's comparative balance sheet and income statement for last year appear below: The company declared and paid $49,000 in cash dividends during the year. It did not sell or retire any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by (used in) operating activities.On the statement of cash flows, the selling and administrative expense adjusted to a cash basis would be:
A) $201,000
B) $166,000
C) $254,000
D) $210,000

Question

Van Beeber Corporation's comparative balance sheet and income statement for last year appear below:  The company declared and paid $49,000 in cash dividends during the year. It did not sell or retire any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by (used in) operating activities.On the statement of cash flows, the selling and administrative expense adjusted to a cash basis would be:
A) $201,000 
B) $166,000 
C) $254,000 
D) $210,000

Quizplus · Accepted Answer

The selling and administrative expense adjusted to a cash basis would be calculated by taking the selling and administrative expense reported on the income statement and adjusting for any changes in accounts payable, accounts receivable, and prepaid expenses. Using the information provided on the comparative balance sheet, the change in accounts payable was an increase of $28,000, the change in accounts receivable was a decrease of $9,000, and the change in prepaid expenses was an increase of $2,000. Adjusting the reported selling and administrative expense of $163,000 for these changes results in a cash basis selling and administrative expense of $166,000 ($163,000 + $28,000 - $9,000 + $2,000).

Van Beeber Corporation's Comparative Balance Sheet and Income Statement for Last