Avatar Company Uses the Direct Method to Prepare Its Statement

question 16

Essay

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 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

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

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Definitions:

Operating Activities

Activities that are directly related to the primary operations of a company, such as manufacturing, distributing, marketing, and selling a product or service.

Retained Earnings

The amount of net income left over for the business after it has paid out dividends to its shareholders.

Dividend Expense

Typically, this is a misnomer as dividends are not expensed but are distributions of earnings to shareholders from the retained earnings of a company.