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

The change in net working capital for the corporation is -$90,000, which is found by subtracting the increase in current liabilities ($150,000) from the increase in current assets ($60,000).

Step-by-step explanation:

The question deals with the calculation of the change in net working capital for a corporation that is considering expansion. Net working capital is calculated as the difference between current assets and current liabilities. In this case, the current assets increase by a total of $60,000 ($10,000 cash + $20,000 accounts receivable + $30,000 inventories) while the current liabilities increase by a total of $150,000 ($40,000 accounts payable + $30,000 accruals + $80,000 long-term debt). To find the change in net working capital, subtract the increase in current liabilities from the increase in current assets.

Therefore, the change in net working capital is $60,000 - $150,000 = -$90,000.

Answer 2

- $ 10,000

Step-by-step 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