Question

Canyon Tours showed the following components of working capital last year: Beginning of YearEnd of Year Accounts receivable$ 25,40023,700 Inventory12,70013,900 Accounts payable15,20017,900 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 $36,700 and costs were $24,700, what was cash flow for the year? Ignore taxes.

Answer 1

a. - $3,200

b. $15,200

Step-by-step explanation:

The computation of the working capital for both the years is shown below:

Beginning of Year

= Accounts receivable + inventory - accounts payable

= $25,400 + $12,700 - $15,200

= $22,900

End of year

= Accounts receivable + inventory - accounts payable

= $23,700 + $13,900 - $17,900

= $19,700

So, the change in net working capital

= $22,900 - $19,700

= - $3,200

b. The computation of the cash flow for the year is shown below:

= Sales - costs - change in working capital

= $36,700 - $24,700 - (-$3,200)

= $15,200