Neutral Paints Company Uses the Direct Method for Preparing Its

question 17

Multiple Choice

Neutral Paints Company uses the direct method for preparing its statement of cash flow.Neutral reports the following information regarding 2017: From the income statement:
Sales Revenues,$266,000
Cost of Goods Sold,$215,000
Operating Expenses,$37,000
From the balance sheet:
$$\begin{array} { | l | r | r | } \hline & \text { Beginning Balance } & \text { Ending Balance } \\\hline \text { Accounts Receivable } & \$ 14,500 & \$ 18,000 \\\hline \text { Merchandise Inventory } & 23,800 & 17,800 \\\hline \text { Accounts Payable } & 6,200 & 13,700 \\\hline \text { Accrued Liabilities } & 4,400 & 1,500 \\\hline\end{array}$$ What amount will be shown for payments to suppliers for operating expenses? (Accounts Payable are for purchases of merchandise inventory only,and Accrued Liabilities relate to operating expenses. )

• A)$39,900
• B)$37,000
• C)$35,500
• D)$41,400

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Definitions:

Unrelated Facts

information or data points that do not have a connection or relevance to each other.

Confirmation Error

What occurs when focusing only on information that confirms a decision already made.

Sunk-Cost Fallacy

The misconception that more resources should be dedicated to something because significant resources have already been spent.

Escalation Of Commitment

The phenomenon where people increase their investment in a decision despite new evidence suggesting it may be wrong.