A project increases accounts receivable and accounts payable by $500,000.00 each. All other working capital accounts are unaffected. What is the project's effect on working capital?
A)Working capital increases by $1 million.
B)Cannot be calculated without considering accumulated depreciation.
C)Working capital is unaffected.
D)Working capital increases, but the amount cannot be determined.

Question

Quizplus · Accepted Answer

The increase in accounts receivable is offset by an increase in accounts payable, leaving all other working capital accounts unaffected. Therefore, the project's effect on working capital is zero, and choice C is correct.

A Project Increases Accounts Receivable and Accounts Payable by $500,000