A Company Reported the Following Account Balances on the Balance

question 56

Multiple Choice

A company reported the following account balances on the balance sheets for year 1 and year 2 (in 000's) : $$\begin{array} { | l | l | l | l | l | l | } \hline \text { Current Assets } & \text { Year 1 } & \text { Year 2 } & \text { Current Liabilies } & \text { Year 1 } & \text { Year 2 } \\\hline \text { Cash } & \$ 60 & \$ 120 & \text { Accounts payable } & \$ 60 & \$ 100 \\\hline \text { Accounts receivable } & 80 & 80 & \text { Wages payable } & 40 & 40 \\\hline \text { Prepaid ins urance } & 40 & - 0 - & \text { Interest payable } & 30 & 20 \\\hline \text { Inventory } & 20 & 76 & \text { Notes payable } & 10 & 80 \\\hline\end{array}$$ The increase or decrease in working capital for year 2 is (in 000's) :

• A) $24 increase.
• B) $24 decrease.
• C) $42 increase.
• D) $42 decrease.

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Definitions:

Net Investment

The difference between total investment in new physical assets and depreciation on existing assets, indicating the net increase in the capital stock of an economy.

Economy

A system of production, distribution, and consumption of goods and services within a region or country.

Gross Domestic Product (GDP)

The aggregate value, measured in terms of money or market worth, of every finished product and service generated within a country's borders over a certain time span.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's profits.