Question

You are given the following information for Thrice Corp.:          Decrease in inventory $ 550...

You are given the following information for Thrice Corp.:

   

  
  Decrease in inventory $ 550
  Decrease in accounts payable 225
  Increase in notes payable 210
  Increase in accounts receivable 240

  

1) Did cash go up or down? By how much?

2) Classify each event as a source or use of cash.
Business   Accounting   
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Answer #1

Sol. Calculation of Cash effect from following transactions

Particulars Amount Remarks
Decrease in inventory 550 Source of cash - It indicates as excess sales so more cash will be generated
Less: Decrease in accounts payable (225) Use of cash - As the payment has been made to accounts payable
Add: Increase in notes payable 210 Source of cash - As payment hasn't been made so avoidance of outflow is inflow
Less: Increase in accounts receivable (240) Use of cash - As more amount got stuck with debtors so avoidance of inflow is outflow
Net cash generated/(used) 295
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