Last year Ty's Grocery had inventory of $237,500 and ﬁxed assets of $51,400. This year, Ty's has inventory of $231,900 and ﬁxed assets of $48,700. Depreciation for this year is $6,300. Which one
Of the following statements is true given this information?
A) Both inventory and ﬁxed assets are uses of cash in the amounts of $5,600 and $3,600, respectively.
B) Both inventory and ﬁxed assets are uses of cash in the amounts of $5,600 and $2,700, respectively.
C) Inventory is a source of cash in the amount of $5,600 and ﬁxed assets is a use of cash in the amount of $2,700.
D) Inventory is a source of cash in the amount of $5,600 and ﬁxed assets is a use of cash in the amount of $3,600.
E) Both inventory and ﬁxed assets are sources of cash in the amounts of $5,600 and $3,600 respectively.

Question

Quizplus · Accepted Answer

From the information given, we can determine that inventory decreased by $5,600 ($237,500 - $231,900) which means it was sold or used, resulting in a source of cash. Fixed assets decreased by $2,700 ($51,400 - $48,700) and depreciation was $6,300, therefore the actual use of cash for fixed assets was $3,600. Therefore, the correct answer is D.

Last Year Ty's Grocery Had Inventory of $237,500 and ﬁXed