FRA Question - Indirect Cash Flow

CFA Level I FRA
#1

I am confused on this question. I got the wrong answer, can anyone get the right one and please explain. Thank you

Q. The following information is available for a company that reports its cash flow using the indirect method:

2015 2014

Other Operating expenses 80,050 76,230

Prepaid insurance expenses 8,400 10,600

Accrued Utilities payable 23,020 21,500

.Insurance and utilities are the only two components of other operating expenses. The cash the company paid in other operating expenses in 2015 is closest to:

  1. €79,370.
  2. €80,730
  3. €76,330
#2

In 2015 the company used up some of its Prepaid Insurance, so that part of its other operating expenses wasn’t a cash payment.

In 2015 the company increased its Accrued Utilities Payable, so that part of its other operating expenses wasn’t a cash payment.

I suspect that the answer is 2, but it might be 3.

Or, possibly, both.

#3

Sorry I did not have the correct Answers, I updated it to reflect the correct answers. Take a look at it again.

#4

After what I wrote, you should be able to determine the correct answer.

Show us what you’ve got.

#5

Is 3 the correct answer ?

If yes, then i can proceed explaining how i arrived at the solution as i assume explaining how i arrived at an incorrect solution may cause further confusion

#6

Tell us what you got, right or wrong.

We promise not to be any more confused than we already are.

#7

I believe it is also c) 76,330.

Prepaid insurance expense decreased by 2,200 (cash inflow)

Accrued utilities payable increased by 1,520 (cash inflow)

80,050 - 2,200 - 1,520 = 76,330.

#8

pizza95 beat me to it :slight_smile:

I’d have responded with similar workings