Parmesan Company Uses the Direct Method for Its Statement of Cash

question 76

Multiple Choice

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2013:
$$\begin{array}{l}\text { From the income statement: }\\\begin{array} { l r } \text { Revenues: } & \$ 240,000 \\\text { Cost of goods sold: } & \$ 190,000 \\\text { Operating expenses: } & \$ 25,000\end{array}\\\begin{array} { c c c } \text { From the balance sheet: } & \text { Beginning balance } & \text { Ending balance } \\\text { Accounts receivable: } & \$ 12,000 & \$ 15,000 \\\text { Inventory: } & \$ 22,000 & \$ 18,000 \\\text { Accounts payable: } & \$ 7,000 & \$ 12,000 \\\text { Accrued liabilities: } & \$ 3,000 & \$ 1,200\end{array}\end{array}$$
- On the statement of cash flows, what amount will be shown for payments to suppliers for operating expenses? (Please assume that accounts payable are for purchases of inventory only.)

• A) $26,800
• B) $23,200
• C) $30,000
• D) $18,600

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Definitions:

Marginal Cost

The change in total cost that arises when the quantity produced is incremented by one unit.

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the quantity of output.

Marginal Cost

The price of fabricating another unit of a good or service.

Marginal Revenue

The additional income produced through the sale of one more unit of a product or service.