A corporation is considering expanding operations to meet growing demand. With the capital expansion the current accounts are expected to change. Management expects cash to increase by $10,000, accounts receivable by $20,000, and inventories by $30,000. At the same time accounts payable will increase by $40,000, accruals by $30,000, and longminusterm debt by $80,000. The change in net working capital is ________.

Question

contestada

Respuesta :

valetta valetta · Answer 1 · 2019-08-19T08:42:46+02:00

Answer:

- $ 10,000

Explanation:

Given:

Increase in cash = $ 10,000

Increase in accounts receivable = $20,000

Increase in inventories = $30,000

Increase in accounts payable = $40,000

Increase in accruals = $30,000

Increase in longminusterm debt = $80,000

now, the net increase in capital = Increase in cash + Increase in accounts receivable + Increase in inventories

or

the net increase in capital = $ 10,000 + $20,000 + $30,000 = $ 60,000

also, the net decrease in the capital = Increase in accounts payable + Increase in accruals

or

the net decrease in the capital = $40,000 + $30,000 = $ 70,000

thus,

the change in working capital = the net increase in capital - the net decrease in the capital

or

the change in working capital = $ 60,000 - $ 70,000 = - $ 10,000