Cribbets Company uses the direct method in determining net cash provided by operating activities, During the year, operating expenses were $290,000, prepaid expenses increased $20,000, and accrued expenses payable increased $30,000. Cash payments for operating expenses were
A) $240,000.
B) $340,000.
C) $300,000.
D) $280,000.

Question

Quizplus · Accepted Answer

The cash payments for operating expenses are calculated by adjusting the operating expenses for changes in prepaid and accrued expenses. The formula is: Operating Expenses + Increase in Prepaid Expenses - Increase in Accrued Expenses Payable = Cash Payments. Thus, $290,000 + $20,000 - $30,000 = $280,000.

Cribbets Company Uses the Direct Method in Determining Net Cash