Use the table for the question(s)below.
-You are considering adding a microbrewery onto one of your firm's existing restaurants. This will entail an increase in inventory of $8 000, an increase in accounts payables of $2 500, and an increase in property, plant, and equipment of $40 000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the microbrewery is
A)$6 500.
B)$10 500.
C)$5 500.
D)$45 500.

Question

Use the table for the question(s)below. 
-You are considering adding a microbrewery onto one of your firm's existing restaurants. This will entail an increase in inventory of $8 000, an increase in accounts payables of $2 500, and an increase in property, plant, and equipment of $40 000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the microbrewery is
A)$6 500. 
B)$10 500. 
C)$5 500. 
D)$45 500.

Quizplus · Accepted Answer

The change in net working capital is calculated as Change in Current Assets - Change in Current Liabilities. In this case, the increase in inventory of $8,000 is an increase in current assets, but the increase in accounts payable of $2,500 is a decrease in current liabilities. Therefore, the change in net working capital is $8,000 - $2,500 = $5,500. The increase in property, plant, and equipment is a long-term asset and does not affect net working capital.

Use the Table for the Question(s)below