Question

under the indirect method, a us gaap-compliant company reported total revenue of $359 million, net income of $35 million, a decrease in income tax payable of $16 million, and an increase in interest expense payable of $22 million. based on this information, converting to the direct method would result in cash paid for operating expenses of:

Answer 1

converting to the direct method would result in cash for operating expenses of $318M

Step 1: Total operating expenses = Total revenue − Net income = ($359 million − $35 million) = $324 million.

Step 2: There are no non-cash expenses or revenues, therefore Total expenses = are $324 million, and Total cash revenues = are $359 million.

Step 3: Total cash operating expenses = Total operating expenses plus the decrease in income tax paid minus the increase in interest expense payable = $324 million + $16 million − $22 million = $318 million.

What are operating expenses?

An income statement summarizes a company's operating expenses. Depending on its setup and industry, every business has a unique set of operational costs. Examine your general ledger and seek expenses that have no bearing on the price of producing your product or service to identify your company's running costs.

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