16) Calculate the working capital amount given the following data: Be sure to properly label your...
16) Calculate the working capital amount given the following data: Be sure to properly label your answer. Show all work.
Cash $10,000
A/R 20,000
Inventory 10,000
PPE (LTA) 50,000
Notes Payable (CL) 10,000
Mortgage Payable (LTL) 40,000
Retained Earnings 40,000
Rent expense 1,000
Car expense 500
Shipping expense 100
* LTL = long term liability, CL = current liability, LTA= Long term asset
17) Calculate the current ratio using the data in problem
16. Be sure to properly label your answer. Show all your
work.
Homework Answers
16.
Working capital is the difference between current assets and current liabilities. Working capital is essential running capital to perform daily business operations.
Current assets = Cash + A/R + Receivables = 10,000 + 20,000 + 10,000 = $ 40,000
Current liabilities = Notes payable = $ 10,000
Working capital = Current assets – current liabilities = 40,000 – 10,000 = $ 30,000
17.
Current ratio is liquidity ratio depicting the ability of company to meet its short-term obligations within 1 year. To compute, current ratio, current assets is divided by current liabilities.
Using data from 16,
Current assets = $ 40,000
Current liabilities = $ 10,000
Current ratio = current assets/current liabilities = 40,000/10,000 = 4
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