Diane Corporation is preparing its year-end balance sheet. The company records s

Question

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: $530,000 ml Notes payable (8%, due in 5 years) tilmel1NE1mm ccounts payablo Inoome 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 15,000 56,000 14,000 3,000 7,000 90,000 7,000 3,000 2,000 400 100,000 Common stock Required 1-a. What is the amount of current liabilities? 1-b. Compute working capital. be different if the company reported $250,000 worth of contingent liablities in the notes to its financial statements? Yes O No

Explanation / Answer

Current Liabilities include those liabilities which become due within one year or one operating cycle. Liabilities Nature Reason Amount for Current Liabilities Notes Payable (due in 5 years) Non-Current Payable after 1 year or one operating cycle $0.00 Accounts Payable Current Payable within 1 year or one operating cycle $56,000.00 Income Taxes Payable Current Payable within 1 year or one operating cycle $14,000.00 Liability for Withholding Taxes Current Payable within 1 year or one operating cycle $3,000.00 Rent Revenue Collected in advance Current Payable within 1 year or one operating cycle $7,000.00 Bonds Payable (in 15 years) Non-Current Payable after 1 year or one operating cycle $0.00 Wages Payable Current Payable within 1 year or one operating cycle $7,000.00 Property Taxes payable Current Payable within 1 year or one operating cycle $3,000.00 Notes Payable (due in 6 months) Current Payable within 1 year or one operating cycle $12,000.00 Interest Payable Current Payable within 1 year or one operating cycle $400.00 1.a. - Total Current Liabilities $102,400.00 Working Capital = Total Current Asset - Total Current Liabilities Total Current Assets $168,000.00 (Total Assets - Non Current Assets = $530,000 - $362,000) Less: Total Current Liabilities $102,400.00 1.b. - Working Capital $65,600.00 2. No as Contingent Liabilities do not affect current liability and working capital

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