Smith Corporation entered into the following transactions: • Purchased inventory on account.
• Collected an account receivable.
• Purchased equipment using cash.
Which of the following statements is correct?
A) The inventory purchase on account increased working capital.
B) Collecting an account receivable increases working capital.
C)The equipment purchase decreases working capital.
D)The inventory purchase on account decreases working capital.

Question

Quizplus · Accepted Answer

Purchasing equipment using cash decreases working capital because it reduces current assets (cash) without affecting current liabilities.

Smith Corporation Entered into the Following Transactions: • Purchased Inventory