Question 6

Assume Comfy Home sold inventory costing $25,000 to a local builder for $40,000 cash on December 31, 2017.

Using the financial statements provided as a basis, what would be the impact on the December 31, 2017 financial statements? Assume that Comfy Home prepares the operating section of its statement of cash flows using the indirect method.

Select all that apply.

1. Cash on the balance sheet increases by $40,000

2. Inventory on the balance sheet decreases by $25,000

3. Accounts Receivable on the balance sheet increases by $40,000

4. Cost of Goods Sold on the income statement increases by $25,000

5. Revenue on the income statement increases by $40,000

6. Net Cash from Operating Activities on the statement of cash flows increases by $40,000

7. Net Cash from Investing Activities on the statement of cash flows decreases by $25,000

8. The sale will alter accounts receivables; an adjustment of ($40,000) will be needed to calculate net Cash from Operating Activities on the statement of cash flows when using the indirect method.