Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881



Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

Cash Payments for Operating Expenses

Luna Inc. reported operating expenses of $174,500, excluding depreciation expense of $36,200 for 2019. During 2019, Luna reported a decrease in prepaid expenses of $8,500 and a decrease in accrued liabilities of $18,200.


Compute the amount of cash payments for operating expenses using the direct method.

To determine


Operating expense is the expense the business causes in selling merchandise or giving administration and dealing with the organization. These are generally isolated into selling and regulatory expense and incorporates a thing, for example, promoting expense, pay rates, and wages, protection expense, utility expense, property charge expense, and devaluation. These are perceived when products and administration are utilized, not when money is paid. In this manner, the expense sums provided details regarding the announcement will most likely not equivalent the measure of money really paid amid the present time frame.

To choose:

Compute the amount of cash payment for operating expense using the direct method.


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

Cash paid for operating expense =$174,500

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