Wellington Company Uses the Direct Method to Prepare Its Statement

question 114

Multiple Choice

Wellington Company uses the direct method to prepare its statement of cash flows. Refer to the following financial statement information for the year ended December 31, 2015: On Wellington's statement of cash flows, using the direct method, what amount will be shown for payments to suppliers for Inventory and other Operating Expenses? Assume Accrued Liabilities relate to Other Operating Expense.

• A)$197,000
• B)$176,000
• C)$21,000
• D)$200,000

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Definitions:

Opportunity Costs

The loss of potential gain from other alternatives when one particular alternative is chosen over others.

Marginal Revenue

The supplementary income produced through the sale of an extra unit of a product or service.

Equilibrium Price

The price at which the quantity of goods suppliers are willing to produce equals the quantity of goods consumers are willing to buy.

Normal Profit

The minimum level of profit necessary for a company to remain competitive in the market, covering opportunity costs but not generating economic profit.