Question

Diane Corporation is preparing its year-end balance sheet. The company records show the following selected amounts at the end of the year:

Total assets	$	530,000
Total noncurrent assets		358,000
Liabilities:
Notes payable (8%, due in 5 years)		17,000
Accounts payable		54,000
Income taxes payable		15,000
Liability for withholding taxes		2,000
Rent revenue collected in advance		11,000
Bonds payable (due in 15 years)		109,000
Wages payable		11,000
Property taxes payable		7,000
Note payable (10%, due in 6 months)		13,000
Interest payable		800
Common stock		270,000

Required:

1-a. What is the amount of current liabilities?

1-b. Compute working capital.

2. Would your computation be different if the company reported $260,000 worth of contingent liabilities in the notes to its financial statements?

• Yes

• No

Answer 1

1 (a) Current Liabilities:

Explanation:

Accounts payable	$ 54000
Liability for withholding taxes	$2000
Income taxes payable	$15000
Rent revenue collected in advance	$11000
Wages payable	$11000
Property taxes payable	$7000
Note payable (10%, due in 6 months)	$13000
Interest payable	$800
Total Current Liability	$ 113,800

1(b) Working Capital

Current Asset	$ 172000
Less: Current Liability	($ 113800)
Working Capital	$ 58,200

Current Assets:

= Total assets - Total noncurrent assets

= $ 5,30,000 - $ 3,58,000

= $ 172000

2) No

( contingent liability does not make any difference on current liability so it would not have any impact on computation.)