Using the direct method to prepare the statement of cash flows, how would the amount of cash payments to employees categorized on the statement of cash flows?
A)Cash payments to employees would be equal to salary expense plus the beginning balance in salaries payable.
B)Cash payments to employees would be equal to salary expense plus the ending balance in salaries payable.
C)Cash payments to employees would be equal to salary expense plus the decrease in salaries payable.
D)Cash payments to employees would be equal to salary expense plus the increase in salaries payable.

Question

Quizplus · Accepted Answer

Cash payments to employees would be equal to salary expense plus the decrease in salaries payable, as this reflects the actual amount of cash paid out to employees during the period, taking into account any changes in the balance of salaries payable. The decrease in salaries payable would indicate a reduction in the amount owed to employees, which would have been paid in cash during the period.

Using the Direct Method to Prepare the Statement of Cash