During the year, Doug's Bakery decreased its accounts receivable by $50, increased its inventory by $100, and decreased its accounts payable by $50. For these three accounts, the firm has a net:
A) $200 use of cash.
B) $100 use of cash.
C) $0 use of cash.
D) $100 source of cash.
E) $200 source of cash.

Question

Quizplus · Accepted Answer

Decreasing accounts receivable by $50 means cash was collected, which is a source of $50. Increasing inventory by $100 uses cash. Decreasing accounts payable by $50 means cash was paid out, using another $50. The net effect is $100 used in cash ($50 source - $100 use - $50 use = -$100).

During the Year, Doug's Bakery Decreased Its Accounts Receivable by $50