Question

As of December 31, the Stanford company has the following information. Use this information to answer questions 1 to 3. Cash $5,000 Accounts Receivable 15,000 Inventory 40,000 Prepaid Insurance 3000 Fixed Assets 100,000 Accounts Payable 15,000 Notes Payable in 5 Months 12,500 Salary Payable 25,000 Notes Payable in 5 years 35,000 Owner’s Equity 98,000 2. What is the company's Working Capital? Question 2 options: 12,500 10,500 15,000 15,500

Answer 1

Answer:

$10,500

Explanation:

Calculation for Stanford Company's Working Capital

Using this formula

Working capital =Current Assets- Current Liabilities

Where,

Current Assets = Cash + Accounts Receivable + Inventory + Prepaid Insurance

Current Assets = ($5,000 + $15,000 + $40,000 + $3,000) = $63,000

Current Liabilities = Accounts Payable + Notes Payable in 5 Months + Salary Payable

Current Liabilities = ($15,000 + $12,500 + $25,000) = $52,500

Let plug in the formula

Working capital =$63,000-$52,500

Working capital =$10,500

Therefore the Working Capital for Stanford Company will be $10,500