Rocket Corporation Entered into the Following Transactions: • the Accrual

question 30

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:

Third Party

An entity not directly involved in a transaction or agreement but may be affected by it or have an interest in its outcome.

Business Transactions

Financial activities or agreements carried out between parties, often involving the exchange of goods, services, money, or property.

Principal

In a contractual relationship, the principal is the party who authorizes an agent to act on their behalf.

Certified Mail

A postal service that provides the sender with a mailing receipt and electronic verification that an item was delivered or that a delivery attempt was made.