When Preparing a Statement of Changes in Financial Position Using

Multiple Choice

When preparing a statement of changes in financial position using the cash basis for defining funds, an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

A) Funds were increased since inventory is a current asset
B) The net increase in inventory reduced cost of goods sold but represents an assumed use of cash
C) Inventory is an expense deducted in computing net earnings, but is not a use of funds
D) All changes in noncash accounts must be disclosed under the all financial resources concept