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

question 168

Multiple Choice

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.

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Definitions:

Present Value

The immediate financial worth of an expected future sum of money or cash flows, discounted with a predetermined rate of return.

Insurance Settlement

The payment made by an insurance company to a policyholder or claimant as compensation for a covered loss.

Discount Rate

in finance, refers to the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

Lump Sum

A single payment made at a particular time, as opposed to multiple payments over time.