Parmesan Company Uses the Direct Method for Its Statement of Cash

question 149

Multiple Choice

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2014: From the income statement:
Sales Revenues, $265,000
Cost of Goods Sold, $210,000
Operating expenses, $31,000
From the balance sheet:
$$\begin{array} { | l | r | r | } \hline & \text { Beginning Balance } & \text { Ending Balance } \\\hline \text { Accounts Receivable: } & \$ 14,500 & \$ 17,800 \\\hline \text { Inventory: } & 23,500 & 17,800 \\\hline \text { Accounts Payable: } & 6,000 & 13,500 \\\hline \text { Accrued Liabilities: } & 4,000 & 1,500 \\\hline\end{array}$$ On the statement of cash flows, what amount will be shown for payments to suppliers for inventory purchases? (Assume that Accounts Payable are for purchases of inventory only.)

• A) $204,300
• B) $211,800
• C) $196,800
• D) $208,200

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Definitions:

Capital Goods

Long-term assets used by businesses to produce goods and services, such as buildings, machinery, and equipment.

Pierre-Joseph Proudhon

A French socialist philosopher and politician, best known for his declaration that "property is theft" in the context of his critique of the social injustices of his time.

External Benefits

Benefits of a product or service that are enjoyed by people who are not directly involved in the purchase or production of it.

Federal Government

The national government of a federal country, which holds the central political authority.