Peterson Painting Company is a commercial paintingcontractor. At the beginning of 20X7, Peterson's net working capital was$350,000. The following transactions occurred during 20X7:
Performed services on credit$150,000
Purchased office equipment for cash10,000
Recognized salaries expense54,000
Purchased paint supplies on on credit 25,000
Consumed paint supplies 20,000
Paid salaries50,000
Collected accounts receivable157,000
Recognized straight-line depreciation expense2,000
Paid accounts payable15,000
Calculate Peterson's working capital at the end of 20X7 andthe change in cash for the year 20X7.
Working capitalChange in cash
A)$416,000 $82,000
B) $414,000$82,00
C)
$416,000$80,000
答案 A
Transaction
Amount
Working capital
Cash
Performed services on credit$150,000Increase A/R
Purchased PP&E for cash10,000Decrease cash-$10,000
Recognized salaries expense54,000
Increase A/P
Purchased paint supplies on on credit25,000Increase inventories, increase A/P
Consumed paint supplies20,000Decrease inventories
Paid salaries50,000Decrease cash, decrease A/P-$50,000
Collected accounts receivable157,000
Increase cash, decrease A/R+$157,000
Recognized straight-line depreciation expense2,000
Paid accounts payable15,000Decrease cash, decrease A/P-$15,000
The change in cash was 82,000 (157,000 collections-10,000 from equipment purchase -50,000 salaries paid -$15,000 for payables).
Working capital at the end of 20X7 is 416,000 (350,000beginning working capital + 150,000 increase in accounts receivable fromservices -10,000 office equipment purchase
-54,000 salaries expense accrual -20,000 consumedsupplies).
Purchasing 25,000 of paint supplies on credit has no net effect on working capital (current assets and current liabilities increase). Consuming 20,000 of these supplies reduces working capital (current assets decrease).
Salary expense reduces working capital by 54,000 when recognized (current liabilities increase). Paying 50,000 of these salaries has no net effect on working capital (current assets and current liabilities decrease).
Collecting accounts receivable has no net effect on working capital (one current asset increases and another decreases).
Recognizing depreciation does not affect working capital.
Paying accounts payable has no net effect on workingcapital (current assets and current liabilities decrease).
