Operating expenses other than depreciation for the year were $400,000. Accrued expenses increased by $35,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Question

Quizplus · Accepted Answer

To find the cash payments for operating expenses using the direct method, we adjust the operating expenses for changes in accruals. Therefore, we start with $400,000 in operating expenses and add the increase in accrued expenses of $35,000. This gives us total cash payments for operating expenses of $435,000, which is the answer in choice A. However, this answer includes the increase in accrued expenses, which is not a cash payment. Therefore, we subtract the increase in accrued expenses of $35,000 to get a final answer of $400,000, which is choice B. However, we need to remember that the question is asking for the cash payments, not the total operating expenses. Therefore, we subtract the increase in accrued expenses to get $365,000, which is choice C. All other choices are incorrect, as they do not adjust for the increase in accrued expenses or include the accrued expenses as a cash payment.

Operating Expenses Other Than Depreciation for the Year Were $400,000