A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its financial statements. *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?

Question

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its financial statements.  *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?

Quizplus · Accepted Answer

Under the direct method, the operating activities section reports actual cash received and paid during the period. When calculating cash paid to employees, the increase in salary payable is subtracted from salary expense to determine payments to employees. This means that the increase of $4,000 will be subtracted from salary expense in order to determine the actual cash payments made to employees during the period.

A Company Uses the Direct Method to Prepare the Statement