Mei Company Uses the Direct Method to Prepare Its Statement

question 78

Multiple Choice

Mei Company uses the direct method to prepare its statement of cash flows.Refer to the following information reported for 2017:
Cost of Goods Sold,$153,000
Merchandise Inventory,beginning balance,$28,000
Merchandise Inventory,ending balance,$60,000
Accounts Payable,beginning balance,$8,100
Accounts Payable,ending balance,$5,100
Operating expenses,$27,000
Accrued Liabilities,beginning balance,$2,900
Accrued Liabilities,ending balance,$6,000
Use the direct method to compute the cash paid to suppliers.(Accrued Liabilities relate to operating expenses. )

• A)$163,900
• B)$164,100
• C)$188,000
• D)$211,900

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Definitions:

Manufacturing Company

A company that uses raw materials, components, and parts to produce finished goods through the use of labor, machines, and equipment.

Unit Contribution Margin

The measured profit that each unit sold contributes toward fixed costs and profit, calculated by subtracting variable costs from the sales price per unit.

Operating Income

Earnings before interest and taxes (EBIT), which represents the profit a company earns from its core operations.

Fixed Costs

Overhead expenses that remain constant regardless of the volume of activity or production levels within a company.