What happens on the income statement if inventory goes up by $10? Assuming you paid for it with cash.

The cash flow statement is decreased, since inventory is and asset in the Cash Flow from Operations section. On the balance sheet under the assets, inventory is increased by 10, but cash is decreased by 10. So the changes on the balance sheet cancel out to balance. There are no changes to the income statement.

On the Cash Flow Statement, Inventory is an asset so that decreases your Cash Flow from Operations - it goes down by 10, as does the Net Change in Cash at the bottom. On the Balance Sheet under Assets, Inventory is up by 10 but Cash is down by 10, so the changes cancel out and Assets still equals Liabilities & Shareholders' Equity. There are no changes to the Income Statement. This is a trick question.