Freiman Corporation\'s most recent balance sheet and income statement appear bel
ID: 2497692 • Letter: F
Question
Freiman Corporation's most recent balance sheet and income statement appear below:
Yr 1 Yr 2
Balance sheet
Current assets
Cash 160 120
Account receivable 220 240
Inventory 120 130
Prepaid expenses 40 40
Total current assets 540 530
Plant and equip, net 700 700
Total assets 1,240 1,230
Liabilites and stockholders equilty
Current liabilities
Accounts payable 130 150
Accrued liabilities 90 90
Notes payable, short term 60 70
Total current liabilities 280 310
Bond payable 280 290
Total liabilities 560 600
Stockholders equity
Common stock, $2 par value 100 100
Additional paid-in capital – common stock 200 200
Retained earnings 380 330
Total stockholders equity 680 630
Total liabilities & stockholders equity 1,240 1,230
Income Statement
Sales (all on account) 1,130
Costs of goods sold 780
Gross margin 530
Selling and admin exp 359
Net operating income 171
Interest expense 35
Net income before taxes 136
Income taxes (30%) 41
Net income 95
The working capital at the end of Year 2 is:
$260 thousand
$680 thousand
$700 thousand
$540 thousand
a)$260 thousand
b)$680 thousand
c)$700 thousand
d)$540 thousand
Explanation / Answer
Soln:
The working capital at the end of Year 2 is = Current assets - current liabilities
Working capital at end of year 2 = $ 540,000 - $ 280,000
Working capital at end of year 2 = $ 260,000
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