Question

You are evaluating the balance sheet for Goodman Bees Corporation. From the balance sheet, you find the following balances: cash and marketable securities = 650,000, accounts receivable =1,300,000, inventory = 1,800,000, accrued wages and taxes =540,000, accounts payable = 840,000, and notes payable =640,000. Calculate Goodman Bees' net working capital.

Answer 1

Net working capital is calculated by subtracting total current liabilities from total current assets. In this case, Goodman Bees Corporation's net working capital is $1,730,000.

Step-by-step explanation:

A balance sheet is an accounting tool that lists a company's assets and liabilities. Assets are things of value that a company owns, such as cash, accounts receivable, and inventory. Liabilities are debts or obligations that a company owes, such as accounts payable and notes payable.

In order to calculate net working capital, you need to subtract the total current liabilities from the total current assets. Current assets include cash and marketable securities, accounts receivable, and inventory. Current liabilities include accrued wages and taxes, accounts payable, and notes payable.

Net working capital = Total current assets - Total current liabilities

Using the balances given in the question:

• Total current assets = cash and marketable securities + accounts receivable + inventory = $650,000 + $1,300,000 + $1,800,000 = $3,750,000
• Total current liabilities = accrued wages and taxes + accounts payable + notes payable = $540,000 + $840,000 + $640,000 = $2,020,000
• Net working capital = Total current assets - Total current liabilities = $3,750,000 - $2,020,000 = $1,730,000

Therefore, Goodman Bees Corporation's net working capital is $1,730,000.