Question

Presented below are the ending balances of accounts for the Kansas Instruments Corporation at December 31, 2021.

Account Title		Debits			Credits
Cash	$	40,000
Accounts receivable		170,000
Raw materials		44,000
Notes receivable		120,000
Interest receivable		23,000
Interest payable				$	25,000
Investment in debt securities		52,000
Land		70,000
Buildings		1,700,000
Accumulated depreciation—buildings					640,000
Work in process		62,000
Finished goods		109,000
Equipment		340,000
Accumulated depreciation—equipment					150,000
Patent (net)		140,000
Prepaid rent (for the next two years)		80,000
Deferred revenue					56,000
Accounts payable					200,000
Notes payable					600,000
Restricted cash (for payment of notes payable)		100,000
Allowance for uncollectible accounts					33,000
Sales revenue					1,200,000
Cost of goods sold		470,000
Rent expense		48,000

Additional Information:

1. The notes receivable, along with any accrued interest, are due on November 22, 2022.
2. The notes payable are due in 2025. Interest is payable annually.
3. The investment in debt securities consist of treasury bills, all of which mature next year.
4. Deferred revenue will be recognized as revenue equally over the next two years.

Required:
Determine the company’s working capital (current assets minus current liabilities) at December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Kansas Instruments corporation ($)

Working capital = Current assets - Current liabilities

= (Cash + Accounts receivable + Raw materials + Work in process + Finished goods + Notes receivable + Interest receivable + Short term investments + Prepaid rent) + (Interest payable + Accounts payable + Deferred revenue + Allowance for uncollected accounts)

= (40,000+170,000+44,000+62,000+109,000+120,000+23,000+52,000+40,000(80,000/2)) - (25,000+200,000+28,000(56,000/2)+33,000)

= 660,000 - 286,000 = $ 374,000

NOTES:

Investment in Debt securities are treated as short term investments, Current portion of prepaid rent and Deferred revenue are taken, Notes receivable and interest receivable are considered as current asset, Notes payable are long term in nature but interest is payable annually (current),

Answer 2

Allowance for uncollectible accounts is a negative current asset