Question

ompany paid $48,000 cash to purchase raw materials. The recognition of this event will: Multiple Choice not affect total assets, will decrease net income, and will decrease cash flow. decrease total assets, total equity, and net income. not affect total assets, total equity, or net income. decrease total assets, net income, and net cash flow from investing activities.

Answer 1

Answer:

The recognition of this event will:

not affect total assets, will decrease net income, and will decrease cash flow.

Explanation:

a) Data and Analysis:

Balance Sheet Effect:

Raw materials inventory (Assets) +$48,000

Cash (Assets) -$48,000

Net effect = $0

Income Statement Effect:

Purchase of raw materials (Cost of production) +$48,000

Net income will decrease by cost of $48,000

Statement of Cash Flows (Operating Activities)

Purchase of raw materials (Cash outflow) -$48,000