Question

Based on the given information, what will be the working capital of the company? items amount ($) inventory 50,000 notes payable 20,000 cash at bank 5,000 tax payable 3,000 prepaid rent 5,000.

1) 30,000
2) 23,000
3) 60,000
4) 37,000

Answer 1

The working capital of the company is calculated by subtracting current liabilities ($23,000) from current assets ($60,000), resulting in a working capital of $37,000.

Step-by-step explanation:

Working capital is calculated by subtracting current liabilities from current assets. In the scenario provided, the current assets are the inventory, cash at bank, and prepaid rent.

Therefore, the total current assets are $50,000 (inventory) + $5,000 (cash at bank) + $5,000 (prepaid rent) = $60,000. The current liabilities are the notes payable and tax payable, so the total current liabilities are $20,000 (notes payable) + $3,000 (tax payable) = $23,000. To calculate the working capital, subtract the current liabilities from the current assets: $60,000 - $23,000 = $37,000. Therefore, based on the given information, the working capital of the company is $37,000.