Operating expenses other than depreciation for the year were $400,000. Prepaid expenses increased by $17,000 and accrued expenses decreased by $30,000 during the year. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be
A) $353,000
B) $413,000
C) $447,000
D) $383,000

Question

Quizplus · Accepted Answer

To calculate cash payments for operating expenses using the direct method, adjust operating expenses for changes in prepaid and accrued expenses. Increase in prepaid expenses ($17,000) means cash paid but not yet expensed, and decrease in accrued expenses ($30,000) means expenses recognized but not yet paid. Thus, cash payments = $400,000 + $17,000 - $30,000 = $447,000.

Operating Expenses Other Than Depreciation for the Year Were $400,000