Indicate How Each Event Affects the Elements of Financial Statements $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$

question 118

Short Answer

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$
Tharp Company appropriated $10,000,000 of retained earnings related to its plans for building a new office building. $\begin{array}{|l|l|l|l|l|l|}\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Cash } \\\text { Flow }\end{array}\\\hline&&&\end{array}$

---

Definitions:

Operating Working Capital

Current assets minus current liabilities, reflecting the short-term liquidity of a business.

Expansion Projects

Initiatives undertaken by a firm to increase its capacity or operations, often requiring significant capital investment.

Replacement Projects

Investments undertaken to replace old or obsolete assets with new ones, aiming to maintain or enhance efficiency, productivity, or the competitive position of a business.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not factor into the decision-making process for future investments.