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 cash	10,000
Recognized salaries expense	54,000
Purchased paint supplies on on credit	25,000
Consumed paint supplies	20,000
Paid salaries	50,000
Collected accounts receivable	157,000
Recognized straight-line depreciation  expense	2,000
Paid accounts payable	15,000

Calculate Peterson's working capital at the end of 20X7 andthe change in cash for the year 20X7.

Working capital

Change 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	$150,000	Increase A/R
Purchased PP&E for  cash	10,000	Decrease cash	-$10,000
Recognized salaries  expense	54,000	Increase A/P
Purchased paint  supplies on on credit	25,000	Increase inventories, increase A/P
Consumed paint  supplies	20,000	Decrease inventories
Paid salaries	50,000	Decrease cash, decrease A/P	-$50,000
Collected accounts  receivable	157,000	Increase cash, decrease A/R	+$157,000
Recognized  straight-line depreciation expense	2,000
Paid accounts payable	15,000	Decrease 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).