Question

Canyon Tours showed the following components of working capital last year: Beginning of Year End of...

Canyon Tours showed the following components of working capital last year:

Beginning of Year End of
Year
Accounts receivable $ 25,600 $ 23,800
Inventory 12,800 14,100
Accounts payable 15,300 18,100

   a. What was the change in net working capital during the year? (A negative amount should be indicated by a minus sign.)

b. If sales were $36,800 and costs were $24,800, what was cash flow for the year? Ignore taxes.

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Answer #1

(a)

Beginning net working capital = beginning accounts receivable + beginning inventory - beginning accounts payable

= $25600 + $12800 - $15300 = $23100

Ending net working capital = ending accounts receivable + ending inventory - ending accounts payable

= $23800 + $14100 - $18100 = $19800

Change in net working capital = ending net working capital - beginning net working capital

= $19800 - $23100 = -$3300

(b)

Sales = $36800

Costs = $24800

Cash flow for the year = Sales - costs - change in net working capital

= $36800 - $24800 - (-$3300)

= $36800 - $24800 + $3300 = $15300

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