Company A’s balance sheet showed current assets of $5,000,000 and current liabil

Question

Company A’s balance sheet showed current assets of $5,000,000 and current liabilities of $3,000,000 before the following events.
The Company refinanced a note due in 3 months with another note due in 4 years. The amount of the note is $500,000
The Company determined that $200,000 of accounts receivable will have to be written off.
The Company leased a piece of equipment.  The equipment cost $1,000,000 with annual equal payments of $50,000.
Goodwill of $100,000 was deemed to be impaired and was written off.
Compute working capital.  Show calculations.

Explanation / Answer

Revised current assets= 5,000,000 -200,000-50,000 = 4,750,000

Revised current liabilities = 3,000,000 - 500,000 = 2,500,000

Working capital = 4,750,000 - 2,500,000 = $ 2,250,000

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