16. Diane Corporation is preparing its year-end balance sheet. The company recor

Question

16. Diane Corporation is preparing its year-end balance sheet. The company records show the following selected amounts at the end of the year: Total assets Total noncurrent assets Liabilities S 560,000 326,000 Notes payable (8%, due in 5 years) Accounts payable Income taxes payable Liability for withholding taxes Rent revenue collected in advance Bonds payable (due in 15 years) Wages payable Property taxes payable Note payable (10%, due in 6 months) Interest payable 1,000 55,000 10,000 2,000 9,000 107,000 9,000 5,000 16,000 0420) 160,000 Common stock Required 1-a. What is the amount of current liabilities? urre 1-b. Compute working capital. Working capital 2. Would your computation be different if the company reported $260,000 worth of contingent liabilities in the notes to its financial statements? Yes O No

Explanation / Answer

1-a amount of current liabilities:$106,600.

1-b.working capital = current assets - current liabilities :

here,

total current assets = total assets - total noncurrent assets => $560,000 - 326,000

=>$234,000.

working capital = $234,000 - 106,600 =>$127,400.

2.NO.

contingent liabilities are presented as a foot note to balance sheet and do not affect the calculations based on balance sheet values.

accounts payable $55,000 income tax payable 10,000 liability for with holding taxes 2,000 rent revenue collected in advance 9,000 wages payable 9,000 property taxes payable 5,000 notes payable (due in 6 months) 16,000 interest payable 600 total current liabilites $106,600

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