Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following information reported for the year 2014:
$\begin{array}{ll}
\text { Operating expenses } & \$ 23,000 \
\text { Accrued liabilities beginning balance: } & \$ 1,000 \
\text { Accrued liabilities ending balance: } & \$ 2,000
\end{array}$
What amount was paid to suppliers for operating expenses on a cash basis?
A) $26,000
B) $20,000
C) $22,000
D) $24,000

Question

Quizplus · Accepted Answer

The cash paid to suppliers for operating expenses is calculated as operating expenses plus the increase in accrued liabilities. Here, it's $23,000 + ($2,000 - $1,000) = $24,000. However, the correct calculation should be $23,000 + ($2,000 - $1,000) = $24,000, indicating a mistake in the selection of the correct answer. The correct answer should be D) $24,000 based on the calculation provided.

Avatar Company Uses the Direct Method to Prepare Its Statement