Question

A firm has the following account balances. Which one of the following statements is correct concerning those balances?

Account	Beginning Balance	Ending Balance
Accounts receivable	$18,700	$19,600
Accounts payable	23,100	22,800
Inventory	29,700	28,600
Long-term debt	48,400	42,600
Common stock	56,000	54,500

Group of answer choices

Accounts receivable is a $900 source of cash.

Common stock is a $1,500 source of cash.

Net working capital, excluding cash, is a $1,500 use of cash.

Long-term debt is a $5,800 source of cash.

Total debt is a $6,100 use of cash.

Answer 1

Source of cash is when cash is received or inflow of cash in company while use of cash is when cash is paid or outflow of cash from company.

Ans- Option D

Total Debt in the beginning = Accounts Payable + Long term Debt

= $23,100 +$48,400

= 71,500

Total Debt in the End = Accounts Payable + Long term Debt

= $22,800 +$42,600

= 65,400

Difference from Ending to beginning = $65,400 - $71,500

= -$6100

As the total Debt has decreased from beginning to end which means that debt is been paid which is outflow of cash.

Thus, Total Debt of $6100 is a use of cash.