Question

Bramble Company, has the following account balances at December 31, 2020.

Notes payable ($60,000 due after 12/31/21)		$100,500
Unearned service revenue		72,500
Other long-term debt ($92,000 due in 2021)		239,000
Salaries and wages payable		32,500
Accounts payable		63,000

In addition, Bramble is involved in a lawsuit. Legal counsel feels it is probable Bramble will pay damages of $25,000 in 2021.

a. Prepare the current liabilities section of Bramble’s December 31, 2020, balance sheet.

b. Bramble’s current assets are $569,625. Compute Bramble’s working capital and current ratio. (Round current ratio to 2 decimal places, e.g. 1.25:1.)

Working capital		$
Current ratio			:1

Answer 1

1) Current Liabilities Section of Bramble in Balance Sheet

	December 31, 2020
Current Liabilities:
Notes Payable [$100,500-$60,000(Long Term)]	$40,500
Salaries and Wages Payable	$32,500
Unearned Revenue	$72,500
Accounts Payable	$63,000
Current Portion of other long-term debt	$92,000
Other Current Liabilities (Law Suit Liability)	$25,000
Total Current Liabilities	$325,500

(Law Suit Liability, even if contingent liability, has been taken in current liability because the payment is probable)

2) Bramble's Working Capital and Current Ratio

Working Capital = Current Assets - Current Liabilities = $569,625 - $325,500 = $244,125

Current Ratio = Current Assets/Current Liabilities = $569,625/$325,500 = 1.75