CFA Practice Question

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CFA Practice Question

Etown Bakery provides the following information from its accrual-basis financial statements:

Year 2015 Salaries Expense $100,000
12/31/2014 Salaries Payable $9,000
12/31/2015 Salaries Payable $12,000

How much cash did the bakery pay out for salaries during 2015?

A. $12,000
B. $103,000
C. $97,000
Correct Answer: C

An increase in a liability (salaries payable) results in a decrease in cash outflow. Cash outflow for salaries equals $100,000 accrual expense less the $3,000 increase in salaries payable. Ending salaries payable = Opening salaries payable + Salaries expense - cash (12,000 = 9,000 + 100,000 - X)

User Contributed Comments 9

User Comment
Alfa1 Thus 100k-3k increase in sal payable =97,000. remember to refer to the opening and ending payables/receivables. In this case and increase in the liab results in a decrease in cash outflow. = cash conservation method.
crissy Remember:
Cash paid = Opening salaries pybl - closing salaries pybl + saaries exp for current year.
danlan Total expense is 100K, and 3k unpaid, so 97K paid
asianl6 so... the firm can defer payment of 1200 so we get 100k + 9k - 12k?
Lucho 100-12+9=97
100 total expense
12 expenses no paid liability
9 expenses paid previous year liability
zzhumanov i'd suggest the following:
-9k(paid)-100k (paid)+12k(payable)=[97k]
nayagan thanks crissy
Shaan23 Good thing I did CF statements before this unit

Cash Paid to Employees = Salary X - (Increase in Wages Payable)
AnlstAhmad Thanks crissy
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