Table 17 -5
Parmesan Company Uses the Direct Method for Its

question 125

Multiple Choice

Table 17 -5
Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2017:
From the income statement:
$$\begin{array} { l l } \text { Revenues: } & \$ 240,000 \\\text { Cost of goods sold: } & \$ 190,000 \\\text { Operating expenses: } & \$ 25,000\end{array}$$ $\begin{array}{lcc}\text { From the balance sheet: } & \text { Beginning balance } & \text { Ending balance } \\\text { Accounts receivable: } & \$ 12,000 & \$ 15,000 \\\text { Inventory: } & \$ 22,000 & \$ 18,000 \\\text { Accounts payable: } & \$ 7,000 & \$ 12,000 \\\text { Accrued liabilities: } & \$ 3,000 & \$ 1,200\end{array}$ Note: accounts payable relate to inventory purchases; accrued liabilities relate to operating expenses
-Refer to Table 17-5.On the cash flow statement,what amount will be shown for cash flow from operating activities?

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

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Definitions:

Ask

The lowest price a seller is willing to accept for an asset in financial markets.

Profit

is the financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Bid-ask Margin

The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask), indicative of market liquidity.

Market Maker

An entity that buys and sells securities from their own inventory, ensuring liquidity and trading activity in financial markets.