Avatar Company Uses the Direct Method to Prepare Its Statement

question 94

Multiple Choice

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following information reported for the year 2014:
$\begin{array}{ll}\text { Operating expenses } & \$ 23,000 \\\text { Accrued liabilities beginning balance: } & \$ 1,000 \\\text { Accrued liabilities ending balance: } & \$ 2,000\end{array}$
What amount was paid to suppliers for operating expenses on a cash basis?

• A) $26,000
• B) $20,000
• C) $22,000
• D) $24,000

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Definitions:

Merchandise Inventories

Goods and products that a company holds for the purpose of selling them to customers as part of its business operations.

Cash Collections

The process of receiving and recording the amount of money received from customers or clients, typically in the context of accounts receivable.

Sales Budget

An estimate of the expected sales revenue for a period, which serves as a foundation for a company's production and marketing planning.

Master Budget

An inclusive financial planning document that consolidates all individual budgets related to sales, cost of goods sold, operations, overheads, and capital expenditures.