Presented in the left graph are trends in sales revenue and cash received from customers over a six-year period. In the right graph are trends in cost of goods sold and cash paid for inventory over a six-year period. All inventory is purchased with cash. Sales Revenue vs. Cash Received from Customers Cost of Goods Sold vs. Cash Paid for Inventory $120,000 $450,000 $400,000 $100,000 $350,000 $80,000 $300,000 $250,000 $60,000 $200,000 $40,000 $150,000 $100,000 $20,000 $50,000 $0 $0 Year 1 2 3 4 5 6 Year 1 2 3 4 5 6 Year-End Balance of Accounts Receivable -Year-End Balance of Inventory Sales Revenue -Cost of Goods Sold Cash Received from Customers Cash Paid for Inventory Required: 1. 2. 3. 4. 5. In Year 1, which is higher Sales Revenue or Cash Received? In which year is it most likely the company had a large sale on account without cash being collected? In which year does it appear the cash from that large sale on account is collected? In a year that cash received from customers is greater than sales revenue, the year- end balance of Accounts Receivable: In Year 1, which is higher Cost of Goods Sold or Cash Paid? In which year is it most likely the company had a large purchase of inventory without it being sold? In which year does it appear the excess inventory was sold without an additional cash purchases of inventory to replace it? In a year that cash paid for inventory is greater than cost of goods sold, the year-end balance of Inventory: 6. 7. 8