Smith Corporation entered into the following transactions: • Purchased inventory on account.
• Collected an account receivable.
• Purchased equipment using cash.
Which of the above transactions resulted in an increase in working capital?
A) The inventory purchase on account.
B) Collecting an account receivable.
C)The purchase of equipment using cash.
D)None of the transactions resulted in an increase in working capital.

Question

Quizplus · Accepted Answer

None of the transactions resulted in an increase in working capital. Purchasing inventory on account increases current liabilities and current assets equally, collecting an account receivable increases cash but decreases accounts receivable, and purchasing equipment using cash decreases cash and increases non-current assets.

Smith Corporation Entered into the Following Transactions: • Purchased Inventory