Hogan Company uses the direct method in determining net cash provided by operating activities During the year operating expenses were $295000 prepaid expenses increased $23000 and accrued expenses payable increased $33000. Cash payments for operating expenses were
A) $39000.
B) $51000.
C) $305000.
D) $285000.

Question

Quizplus · Accepted Answer

Using the direct method, cash payments for operating expenses are calculated as operating expenses minus the increase in prepaid expenses plus the increase in accrued expenses payable. Thus, $295,000 - $23,000 + $33,000 = $305,000. However, there was a mistake in the calculation; the correct answer should be operating expenses ($295,000) plus the increase in accrued expenses payable ($33,000) minus the increase in prepaid expenses ($23,000), which equals $305,000, not $285,000 as previously stated. The correct calculation leads to $305,000, indicating an error in the provided options and explanation.

Hogan Company Uses the Direct Method in Determining Net Cash