The 2004 income statement for McDonald\'s Corporation shows cost ofgoods sold $4

Question

The 2004 income statement for McDonald's Corporation shows cost ofgoods sold $4,852.7 million and operating expenses (includingdepreciation expense of $1,201 million) $10,671.5 million. Thecomparative balance sheet for the year shows that inventoryincreased $18.1 million, prepaid expenses increased $56.3 million,accounts payable (merchandise suppliers) increased $136.9 million,and accrued expenses payable increased $160.9 million.

Using the direct method, compute the following: (Round all answers to 1 decimalplace.)

Cash payments to suppliers $ million
Cash payments for operating expenses $ million

Explanation / Answer

     =

Cash payment tosuppliers    = Purchases + accountspayble(beginning) - accounts (ending) Purchase = Cost of goodssold + opening stock - closing stock Purchases        = $4852.7 - ( $18.1)        = $4852.7 - $18.1

     =

$4,834.60 million Cash payment tosuppliers   = $4834.60 - ( $136.9)           = $4834.60 - $136.9           = $4,698.21 million Cash payments foroperating expense          = Expenses accrual - prepaid expense(beginning) + prepaid expense(ending) - outstanding expense(ending ) +outstanding expense(beginning)          = ( $10671.5 - $1201 depreciation) + $56.3 -$160.9 $9470.5 + $56.3 - $160.9 $9,365.90 million Notes: Increase = Ending balance- beginning balance

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