Question

9 What is the net change in working capital that would appear on the cash flow statement given the following: i) Increase in cash of $500 ii) Increase in accounts receivables of $800 ii) Decrease in inventories of $350 iv) Decrease in prepaid expenses of $225 v) Increase in PP&E of $950 vi) Increase in accounts payable of $400 $50 $175 OOOO -$50 0-$175​
$50,000 cash outflow under investing activities
$8,000 cash inflow under investing activities
$42,000 cash outflow under investing activities
$8,000 cash outflow under investing activities

Answer 1

Explanation:

method to record the working capital changes

add: increase In current liabilities and decrease in current assets

less: decrease in current liabilities and increase in current assets

working capital Changes

(i) it will not be recorded as it is a part of cash and cash equivalents

(ii) - 800

(iii)+350

(iv)+225

(v) it is not considered as it is a fixed asset and not a part of working capital

(vi)- 400

therefore, net effect of working capital is (625)

= -800-400+350+225

=-625