When Preparing a Reconciliation of Net Income to Cash from Operations

question 43

Multiple Choice

When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory over the beginning inventory will result in an adjustment to reported net income because:

• A) Cash is increased because inventory is a current asset.
• B) Inventory is an expense deducted in computing net earnings, but is not a use of cash.
• C) The net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers.
• D) All changes in noncash accounts must be disclosed.

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