Question

On January 1, James Company reported total current assets of $658,000 and total current liabilities of $365,000. During the year, James purchased $2,000 worth of equipment for cash, paid $560 towards salaries, and borrowed $80,000 from its bank to be repaid after 5 years. How much working capital does the company have as of December 31

Answer 1

Answer:

$370,440

Explanation:

The computation of the working capital is as follows:

As we know that

Working capital = Current asset - current liabilities

where,

Current Assets is

= Total current assets - purchase of an equipment - salaries - borrowed amount

= $658,000 - $2,000 - $560 + $80,000

= $735,440  

And, Current Liabilities is $365,000  

So, the working capital is

= $735,440 - $365,000    

= $370,440