Cridwell Company's selling and administrative expenses for last year totaled $210,000. During the year the company's prepaid expense account balance increased by $18,000 and accrued liabilities increased by $12,000. Depreciation charges for the year were $24,000. Based on this information, selling and administrative expenses adjusted to a cash basis under the direct method on the statement of cash flows would be:
A) $180,000
B) $192,000
C) $228,000
D) $240,000

Question

Quizplus · Accepted Answer

To adjust the selling and administrative expenses to a cash basis under the direct method, we need to make the following adjustments:

1. Add back the increase in prepaid expenses: + $18,000
2. Deduct the increase in accrued liabilities: - $12,000
3. Deduct the depreciation charges: - $24,000

Adjusted selling and administrative expenses = $210,000 + $18,000 - $12,000 - $24,000 = $192,000.

Therefore, the correct answer is B, $192,000.

Cridwell Company's Selling and Administrative Expenses for Last Year Totaled