Question

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​ ________.

Answer 1

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