Cribbets Company uses the direct method in determining net cash provided by operating activities, During the year, operating expenses were $320,000, prepaid expenses increased $20,000, and accrued expenses payable increased $30,000. Cash payments for operating expenses were
A) $270,000.
B) $370,000.
C) $330,000.
D) $310,000.

Question

Quizplus · Accepted Answer

Using the direct method to determine net cash provided by operating activities, we start with the cash payments for operating expenses and then adjust for changes in prepaid expenses and accrued expenses payable. 
Cash payments for operating expenses = operating expenses - increase in prepaid expenses + increase in accrued expenses payable
= $320,000 - $20,000 + $30,000
= $310,000. 
Therefore, the answer is D.

Cribbets Company Uses the Direct Method in Determining Net Cash