Question

Select the correct answer.

From the following balances for Alpha Inc., calculate the working capital of the company.
Amount ($)
50,000
80,000
10,000
80,000
2,000
Items
Accounts payable
Inventory
Tax payable
Cash at bank
Prepaid rent
OA. $62,000
OB. $102,000
OC. $60,000
O D. $222,000

Answer 1

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Answer 2

To calculate the working capital of Alpha Inc., subtract the current liabilities from the current assets. The working capital in this case is -$38,000.

Step-by-step explanation:

To calculate the working capital of Alpha Inc., we need to subtract the current liabilities from the current assets.

The current assets in this case are the inventory ($80,000), cash at bank ($2,000), and prepaid rent ($10,000), which add up to $92,000.

The current liabilities are the accounts payable ($50,000) and tax payable ($80,000), which add up to $130,000. Subtracting the current liabilities from the current assets gives us the working capital:

Working Capital = Current Assets - Current Liabilities = $92,000 - $130,000 = -$38,000.

Since the working capital is negative (-$38,000), none of the given options (OA, OB, OC, OD) are correct.