Lightning Electric Company uses the direct method to prepare its statement of cash flows.Lightning has reported operating expenses of $63,000 on its income statement for the year 2019.If the balance in accrued liabilities has increased by $6,000 during the year,then $6,000 needs to be added to $63,000 to calculate payments to suppliers for operating expenses.Accrued liabilities relate to operating expenses.

Question

Quizplus · Accepted Answer

The increase in accrued liabilities indicates that not all operating expenses were paid in cash. Therefore, the $6,000 should be subtracted from the $63,000 to calculate the cash payments for operating expenses.

Lightning Electric Company Uses the Direct Method to Prepare Its