Question

A firm has cash of 200,000, accounts receivable of 75,000, prepaid expenses of 12,500, accounts payable of $50,000, other current liabilities of 35,000, common stock of 375,000 and long term liabilities of 65,000. The firm also produced a profit of 20,000 during the last calendar year. What is the firm working capital?

Answer 1

$202,500

Step-by-step explanation:

Working capital is the difference between current assets and current liabilities. Therefore, the formula for calculating working capital is as below.

Working capital = current assets- current liabilities

in this case

current assets =

cash $200,000

account receivable $75,000

prepaid expenses of $12,500,

Total current assets = $287,500

current liabilities

accounts payable of $50,000

other current liabilities of $35,000

Total current liabilities = $85,000

working capital = $287,500 - $85,000

=$202,500