Avatar Company Uses the Direct Method to Prepare Its Statement

question 151

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: In the operating activity section of the statement of cash flows, what amount would be shown for collections from customers?

• A)$244,000
• B)$236,000
• C)$240,000
• D)$258,000

---

Definitions:

Ordinary Repairs

Expenditures to maintain an asset in its normal operating condition without significantly extending its useful life or altering its capacity.

Double-declining-balance Method

An accelerated method of depreciation that counts as an expense twice the straight-line depreciation rate for the declining book value of the asset each year.

Straight-line Method

A method of depreciation that distributes a consistent depreciation expense for an asset throughout its lifetime.

Salvage Value

The estimated residual value of an asset at the end of its useful life, determining how much the asset can be sold for after it is no longer useful for its intended purpose.