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.
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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