Rocket Corporation Entered into the Following Transactions

question 90

Multiple Choice

Rocket Corporation entered into the following transactions:
The accrual of wages and salaries expense.
The cash payment of a six-month note payable.
The cash payment in advance for a one-year insurance policy.
Which of the following statements is correct with respect to determining Rocket's working capital? Assume that Rocket's operating cycle is four months.

• A)The accrual of wages and salaries expense decreases working capital.
• B)The cash payment of the note payable decreases working capital.
• C)The purchase of the insurance policy increases working capital.
• D)The cash payments for the note and insurance both decrease working capital.

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Definitions:

Output

The cumulative quantity of products or services generated by a business, sector, or economic system over a given timeframe.

Profit

The financial gain achieved when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain it.

Demand Schedule

A table or graph showing the quantity of a product that consumers are willing and able to purchase at various prices during a specified period.

Marginal Cost

The supplementary cost resulting from manufacturing an extra unit of a good or service.