Question

XYZ Company began operations in 2019 and entered into the following transactions during the year: May...

XYZ Company began operations in 2019 and entered into the following 
transactions during the year:

May 1:       Sold common stock to owners for $200,000 cash.

May 10:      Purchased inventory costing $40,000 on account.

June 1:      Purchased equipment for $48,000 cash. The equipment
             was assigned a 10-year life and a $6,000 residual
             value.

August 1:    Purchased a two-year insurance policy for $24,000 cash.

October 3:   Sold one-half of the inventory that was purchased on
             May 10 to a customer for $49,000; the customer did
             not pay for the goods, but agreed to pay XYZ Company
             within ninety days.

November 9:  Paid stockholders $10,000 cash as a dividend.

December 17: Collected a $22,000 partial payment from the customer
             who purchased the inventory on October 3.

December 31: Recorded adjusting entries related to the equipment
             and the prepaid insurance.

Calculate the amount of working capital reported by XYZ Company at
December 31, 2019 after all the above transactions are recorded and
all necessary adjusting entries are made and posted.

Homework Answers

Answer #1

Working capital: $166000

Working capital = Current assets - Current liabilities = ($140000 + 27000 + 20000 + 19000) - $40000 = $206000 - $40000 = $166000

Calculations:

Date Assets = Liabilities + Stockholders' Equity
Cash Accounts Receivable Inventory Prepaid Insurance Equipment = Accounts Payable + Common Stock Retained Earnings
May-01 200000 200000
May-10 40000 40000
Jun-01 -48000 48000
Aug-01 -24000 24000
Oct-03 49000 49000
-20000 -20000
Nov-09 -10000 -10000
Dec-17 22000 -22000
Dec-31 -2450 -2450
-5000 -5000
Bal. 140000 27000 20000 19000 45550 40000 200000 11550
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