Wellington Inc -On Wellington's Statement of Cash Flows, Using the Direct Method

question 127

Multiple Choice

Wellington Inc. 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: $$\begin{array} { l r r } \text { Sales Revenue } & \$ 291,300 \\\text { Interest Revenue } & 1,000 \\\text { Gain on Sale of Plant Assets } & 6,000 \\\text { Total Revenues and Gains } && \$ 298,300 \\\text { Cost of Goods Sold } & 145,000 \\\text { Salaries and Wages Expense } & 49,000 \\\text { Depreciation Expense-Plant Assets } & 16,000 \\\text { Other Operating Expense } &25,000 \\\text { Interest Expense } &3,500 \\\text { Income Tax Expense } & \underline{7,800}& \\\text { Total Expenses } & &\underline{ 246,300} \\\text { Net Income } & &\underline{\$ 52,000} \\\hline\end{array}$$
-On Wellington's statement of cash flows, using the direct method, what amount will be shown for payments to employees? Assume Accrued Liabilities relate to Other Operating Expense.

• A) $74,000
• B) $45,000
• C) $25,000
• D) $49,000

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Definitions:

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenue and expenses.

Prior-Period Adjustments

Corrections of errors in previously issued financial statements for periods prior to the issuance of the current financial statements.

Net Income

The net income of a business, which is the amount remaining from total revenue after deducting all costs and taxes.

Depreciable Lives

The estimated period over which a fixed asset is considered to be useful and thus can be depreciated for accounting purposes.