A company reported the following account balances on the balance sheets for year 1 and year 2 (in 000's): The increase or decrease in working capital for year 2 is:
A)$24 increase.
B)$24 decrease.
C)$42 increase.
D)$42 decrease.

Question

A company reported the following account balances on the balance sheets for year 1 and year 2 (in 000's):  The increase or decrease in working capital for year 2 is:
A)$24 increase. 
B)$24 decrease. 
C)$42 increase. 
D)$42 decrease.

Quizplus · Accepted Answer

Working capital is calculated as current assets minus current liabilities. In year 1, working capital was $86 ($283 - $197). In year 2, working capital was $62 ($317 - $255). The decrease in working capital from year 1 to year 2 is $24 ($86 - $62), so the correct answer is B) $24 decrease.

A Company Reported the Following Account Balances on the Balance