Asked by Spiro Billos on May 19, 2024
Verified
The income statement for Jones Company showed cost of goods sold of $80000 and operating expenses of $65000. The comparative balance sheets for the year show that inventory decreased $5000 prepaid expenses increased $7000 accounts payable increased $3000 and accrued expenses payable decreased $5000.
Instructions
Compute (a) cash payments to suppliers and (b) cash payments for operating expenses using the direct method.
Operating Expenses
Operating Expenses are expenditures that a business incurs through its normal business operations, such as salaries, rent, utilities, and equipment depreciation.
Direct Method
A cash flow statement preparation approach that reports major classes of gross cash receipts and payments.
Cost of Goods Sold
An expense recorded to reflect the cost directly associated with producing the goods sold by a company.
- Measure the movement of money associated with activities of operation.
Verified Answer
(b) Cash payments for operating expenses = $77000 ($65000 + $7000 + $5000)
Learning Objectives
- Measure the movement of money associated with activities of operation.
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