XYZ Company began operations in 2019 and entered into the following transactions
ID: 2340948 • Letter: X
Question
XYZ Company began operations in 2019 and entered into the following transactions during the year: May 1: Sold common stock to owners for $200,000 cash. May 10: Purchased inventory costing $40,000 on account. June 1: Purchased equipment for $48,000 cash. The equipment was assigned a 10-year life and a $6,000 residual value. August 1: Purchased a two-year insurance policy for $24,000 cash. October 3: Sold one-half of the inventory that was purchased on May 10 to a customer for $49,000; the customer did not pay for the goods, but agreed to pay XYZ Company within ninety days. November 9: Paid stockholders $10,000 cash as a dividend. December 17: Collected a $22,000 partial payment from the customer who purchased the inventory on October 3. December 31: Recorded adjusting entries related to the equipment and the prepaid insurance. Calculate the amount of working capital reported by XYZ Company at December 31, 2019 after all the above transactions are recorded and all necessary adjusting entries are made and posted.
Explanation / Answer
Working capital: $166000
Working capital = Current assets - Current liabilities = ($140000 + 27000 + 20000 + 19000) - $40000 = $206000 - $40000 = $166000
Calculations:
Date Assets = Liabilities + Stockholders' Equity Cash Accounts Receivable Inventory Prepaid Insurance Equipment = Accounts Payable + Common Stock Retained Earnings May-01 200000 200000 May-10 40000 40000 Jun-01 -48000 48000 Aug-01 -24000 24000 Oct-03 49000 49000 -20000 -20000 Nov-09 -10000 -10000 Dec-17 22000 -22000 Dec-31 -2450 -2450 -5000 -5000 Bal. 140000 27000 20000 19000 45550 40000 200000 11550Related Questions
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