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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Romo Inc. reported the following information for the current year: operating expenses, $325,000; increase in prepaid expenses, $6,200; and decrease in accrued liabilities, $8,800. What is the amount of cash paid for operating expenses that Romo would report on its statement of cash flows under the direct method?

a. $310,000 c. $327,600

b. $322,400 d. $340,000

To determine

Introduction:

Operating expense are the expense the business in selling goods or providing services and managing the company. These are usually dividend into selling and administrative expense and includes item such as adverting expense, salaries and wages, insurance expense, tax expense and deprecation. These expense are recognized when goods are used, not when cash is paid.

To compute:

What is the amount of cash paid for operating expense that Romo would report on its statement of cash flow under the direct method?

Explanation

Explanation for correct answers:

Cash paid for operating expense = operating expense + increase in prepaid expense + decrease in accrued liabilities.

=$325000+$

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