Under the direct method of preparing the statement of cash flows,the computation of payments to suppliers includes:
A)payments for inventory only.
B)payments for operating expenses only.
C)payments for inventory and operating expenses (excluding employee's wages).
D)payments for inventory,operating expenses,interest expense and income taxes.

Question

Quizplus · Accepted Answer

The direct method of preparing the statement of cash flows includes the calculation of payments to suppliers as a deduction from purchases made by the company. These payments would include both payments for inventory as well as payments for operating expenses (excluding employee's wages). Therefore, choice C is the best option among the given choices. Payments for interest expense and income taxes would be calculated separately.

Under the Direct Method of Preparing the Statement of Cash