Indicate How Each Event Affects the Elements of Financial Statements $\text { Increase }=\mathrm{I} \quad \text { Decrease }=\mathrm{D} \quad \text { No Effect }=\mathrm{N}$

question 86

Short Answer

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Assume use of a perpetual inventory system. $\text { Increase }=\mathrm{I} \quad \text { Decrease }=\mathrm{D} \quad \text { No Effect }=\mathrm{N}$
After a physical count of its inventory, Rand Co. discovered that $5,000 of inventory was missing. Show how the required write-down of inventory would affect Rand's financial statements. $\begin{array} {| l| l| l| l| l| l| l| }\text { Assets}&\text { Liabilities }&\text {Equity}&\text { Revenues}&\text { Expenses }&\text { Net Income }&\text { Cash }\\\hline &&&&&\end{array}$

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Definitions:

Nominal Net Cash Flow

The total amount of cash that flows into and out of a business, not adjusted for inflation.

Inflation Rate

The percentage increase in the general level of prices for goods and services in an economy over a period of time.

NPV

Net Present Value; a financial calculation used to determine the value of a series of future cash flows by discounting them to the present using a specific rate.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks.