Parmesan Company Uses the Direct Method for Its Statement of Cash

question 66

Multiple Choice

Parmesan Company uses the direct method for its statement of cash flow.It reports the following information regarding the year 2016:
From the income statement:
Sales revenues,$269,000
Cost of sales,$213,000
Operating expenses,$36,000
Net profit,$20,000
From the balance sheet:
$$\begin{array} { | l | l | l | } \hline&{ \text { Beginning balance } } & \text { Ending balance } \\\hline \text { Accounts receivable: } & \$ 14,800 & \$ 17,900 \\\hline \text { Inventory: } & 23,500 & 18,500 \\\hline \text { Accounts payable: } & 6800 & 13,500 \\\hline \text { Accrued liabilities: } & 4200 & 1800 \\\hline\end{array}$$

Assume that there were no sales of Non-current assets,no Interest revenue and no expenses other than the expenses shown above.Also,assume that Accounts payable are for purchases of inventory only.On the cash flow statement,what amount will be shown for the net cash flow from operating activities?

• A) $26,200
• B) $64,600
• C) $13,300
• D) $20,000

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Definitions:

Straight-Line Method

A method of calculating depreciation that spreads the cost of an asset evenly over its useful life.

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