Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014: On Avatar's statement of cash flows, using the direct method, what amount will be shown for payments to employees?

Question

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014:  On Avatar's statement of cash flows, using the direct method, what amount will be shown for payments to employees?

Quizplus · Accepted Answer

The payments to employees can be found under the operating activities section of the statement of cash flows. Using the direct method, we can calculate this amount by adding up all the payments made to employees during the year. From the given financial statement information, we can see that wages and salaries expense for the year was $55,000, and the balance of accrued salaries payable decreased by $10,000 from the beginning to the end of the year. Therefore, the cash payments to employees during the year would be:
Wages and salaries expense: $55,000
Decrease in accrued salaries payable: -$10,000
Total payments to employees: $45,000
Therefore, the correct answer is D.

Avatar Company Uses the Direct Method to Prepare Its Statement