Cash Temporary Investments $ 65,000 50,000 Accounts and Notes Receivable Inventó

Question

Cash Temporary Investments $ 65,000 50,000 Accounts and Notes Receivable Inventóry Prepaid Expenses Fixed Assets (net) Accounts Payable Notes Payable (short-term, 110,000 140,000 10,000 900,000 125,000 non-interest bearing) Accrued Liabilities Mortgage Note Payable, 5%, 100,000 25,000 due in 2025 Preferred 8% Stock, $100 par Common Stock, $10 par Paid-in-Capital in Excess of 250,000 100,000 400,000 par, common stock 50,000 Retained Earnings 225,000 Selected data related to the 12 months of the current year reveal the following: Average common stockholders' equity Average stockholders' equity Average inventory Average total assets Cash dividends paid on common stock Cost of goods sold Income before income tax Interest expense Net income Sales $ 650,000 750,000 130,000 1,200,000 40,000 910,000 140,000 20,000 88,000 1,500,000 The common stock was selling for $25 per share at the end of the year. 68. The amount of working capital is a. $250,000 b. $200,000 c. $125,000 d. $100,000 e. $150,000

Explanation / Answer

Working Capital = Current Assets - Current Liabilities

Current Assets = Cash + Temporary investments + Accounts and notes receivable + Inventory + Prepaid Expenses
                         = 65,000 + 50,000 + 110,000 + 140,000 + 10,000
                         = $375,000

Current Liabilities = Accounts payable + Notes payable + Accrued liabilities
                             = 125,000 + 100,000 + 25,000
                             = $250,000

Hence, Working Capital = 375,000 - 250,000 = $125,000

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