Question

Bonner Collision has shareholders' equity of $141,800. The firm owes a total of $126,000 of which 60 percent is payable within the next year. The firm net fixed assets of $161,900. What is the amount of the net working capital

Answer 1

Answer:

The amount of the net working capital is $55,500

Explanation:

The net working capital is calculated by the following formula:

Net working capital = Current assets - Current liabilities

The firm owes a total of $126,000 of which 60 percent is payable within the next year.

Current liabilities = Total liabilities - liabilities paid in next year = $126,000 -  60% x $126,000 = $50,400

Basing on accounting equation:

Total assets = Total liabilities + shareholders' equity = $126,000 + $141,800 = $267,800

Current assets = Total assets - fixed assets = $267,800 - $161,900 = $105,900

Net working capital = $105,900 - $50,400 = $55,500