JK Meadows has beginning current liabilities of $14,602 and total liabilities of $35,418.At the end of the year,the current liabilities are $15,311 and the total liabilities are $37,604.During the year,the firm paid $680 in dividends and $1,320 in interest.What is the cash flow to creditors?
A)$3,230
B)$2,797
C)$3,135
D)−$157
E)−$267

Question

Quizplus · Accepted Answer

To calculate the cash flow to creditors, we need to find the change in total liabilities, subtract the interest payments, and add back any increase in current liabilities (assuming these were due to purchases on credit).

Change in total liabilities = $37,604 - $35,418 = $2186

Cash flow to creditors = change in total liabilities - interest payments + increase in current liabilities 
= $2186 - $1320 + ($15,311 - $14,602) 
= $157 (negative indicates an outflow of cash from the firm to the creditors)

Therefore, the correct answer is D) −$157.

JK Meadows Has Beginning Current Liabilities of $14,602 and Total