Avatar Company Uses the Direct Method to Prepare Its Statement

question 87

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:
$\begin{array}{lr}\text { Cost of goods sold } & \$ 110,000 \\\text { Inventory beginning balance: } & \$ 25,000 \\\text { Inventory ending balance: } & \$ 53,000 \\\text { Accounts payable beginning balance: } & \$ 6,000 \\\text { Accounts payable ending balance: } & \$ 4,000 \\\text { Operating expenses } & \$ 23,000 \\\text { Accrued liabilities, beginning balance: } & \$ 1,000 \\\text { Accrued liabilities, ending balance: } & \$ 2,000\end{array}$ In the operating activities section of the statement of cash flows, what amount will be shown for payments to suppliers?

• A) $136,000
• B) $132,000
• C) $118,000
• D) $162,000

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Definitions:

Problem Definition

The process of identifying and outlining a problem or challenge in order to find workable solutions or answers.

Availability Bias

A cognitive bias that influences people to overestimate the importance of information that is readily available to them, often leading to skewed perceptions and judgments.

Anchoring Bias

A cognitive bias where individuals rely too heavily on an initial piece of information to make subsequent judgments or decisions.

Confirmation Error

A cognitive bias that involves focusing on information that confirms existing beliefs and ignoring information that contradicts them.