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 is a source of cash, increasing inventory by $100 is a use of cash, and decreasing accounts payable by $50 is a use of cash. The net effect is a $100 use of cash ($50 source - $100 use - $50 use = -$100).

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