Question

NNR Inc.'s balance sheet showed total current assets of $1,875,000 plus $4,225,000 of net fixed assets. All of these assets were required in operations. The firm's current liabilities consisted of $475,000 of accounts payable, $375,000 of 6% short-term notes payable to the bank, and $150,000 of accrued wages and taxes. Its remaining capital consisted of long-term debt and common equity. What was NNR's total investor-provided operating capital? Select one: a. $4,694,128 b. $4,941,188 c. $5,201,250 d. $5,475,000 e. $5,748,750

Answer 1

Answer:

d. $5,475,000

Explanation:

For computing the total investor-provided operating capital, first we have to compute the total assets and total current liabilities which is shown below:

Total assets = Current assets + net fixed assets

                    = $1,875,000 + $4,225,000

                    = $6,100,000

Now the total current liabilities = Accounts payable + short term notes payable + accrued wages and taxes

= $475,000 + $375,000 + $150,000

= $1,000,000

Now the long term liabilities would be

= $6,100,000 - 1,000,000

= $5,100,000

So, the  total investor-provided operating capital would be

= Long term liabilities  + short term notes payable

= $5,100,000 + $375,000

= $5,475,000