Parmesan Company Uses the Direct Method for Its Statement of Cash

question 64

Essay

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2013:
From the income statement:
Assume that there were no sales of long-term assets, no interest revenue, and no expenses other than the expenses shown above. Please also assume that accounts payable are for purchases of inventory only.
On the statement of cash flows, what amount will be shown for cash flow from operating activities?
A)$26,800
B)$29,200
C)$23,000
D)$18,600

• A)$26,800
• B)$29,200
• C)$23,000
• D)$18,600

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Definitions:

Variable Administrative Expense

Indirect costs that change in proportion with the level of a company’s production or sales activities.

Fixed Administrative Expense

Expenses that do not change with the level of production or sales over a certain period, related to the administration of a business.

Contribution Format

An income statement format that separates fixed and variable costs to show the contribution margin.

Contribution Format

A type of income statement that separates variable costs from fixed costs, highlighting the contribution margin.