Question

For each of the transactions below, indicate if working capital will increase, decrease, or remain the...

For each of the transactions below, indicate if working capital will increase, decrease, or remain the same.

1. Receive cash for accounts receivable

2. Pay cash for accounts payable

3. Purchase equipment with cash and note payable, to be repaid in 2 years

4. Record adjustment to recognize previously deferred revenue

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Answer #1

1. Working Capital will remain the Same. By this Transaction Cash will increase and Accounts Receivable will decrease with the Same amount and both are Part of Current Assets.

2. Working Capital will Remain the Same. By this transaction both cash and Accounts Payable will decrease with Same amount . Cash is Part of Current Assets and Accounts Payable is Part of Current Liabilities.

3. Working Capital will Decrease. By this Transaction cash will Decrease . Equipment and Note Payable will Increase. Only Cash is Part of working Capital Because of it decrease. working Capital will also Decrease

4.Working Capital will Increase . By this transaction deferred revenue will decrease and revenue will increase.

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