Question

FININ ACCTQ... References Mailings Review View Help 6. If Einscher Toys has working capital of $2,000,000, which of the following will cause its working capital to decrease? A) Recorded interest payable in the amount of $150,000 B) Paid wages payable in the amount of $150,000 C) Borrowed $150,000 from a bank to be repaid in 90 days D) Purchased $150,000 of inventory on credit DELL

Answer 1

1 which of following will cause to decrease working capital? 2 Answer is option a 4 Details as under: 5 Options entry level 6 a.) Record interest payable 150000 Expense a/c Dr. Interest payable a/c Credit 8 b.) Paid wages payable 150000 Wages payable a/c Dr. 9 Cash/Bank a/c Credit 10 c.) Borrow from bank to repay in 90 days Bank a/c Dr. 11 Short term liab. a/c Credit 12 d.) Purchase 150000 inventory on credit Inventor a/c Dr. 13 Short term liab. a/c Credit Account to be effected Detail reason Expense + Liab + will impact on working capital liability increased which leads to reduction in working capital Liab - Cash no impact on working capital as both liability as well as asset reduce Liab+ Cash + no impact on working capital liability as well as asset increased Liab + Inventory + Ino impact on working capital liability as well as asset increased