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

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.

Quizplus · Accepted Answer

The inventory purchase and the collection of the receivable didn't affect working capital. The cash payment decreases current assets and therefore working capital.

Smith Corporation Entered into the Following Transactions