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Prezas Company's balance sheet showed total current assets of $3,500, all of which were required in...

Prezas Company's balance sheet showed total current assets of $3,500, all of which were required in operations. Its current liabilities consisted of $975 of accounts payable, $600 of 6% short-term notes payable to the bank, and $250 of accrued wages and taxes. What was its net operating working capital?

a. $2,025
b. $1,752
c. $2,275
d. $2,821
e. $2,366
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Answer #1

Ans. Option. C. $2,275

Working notes:

*Calculation for operating current liabilities:

Notes payable is not considered as an operating liability, so it would not be included in the calculation of total operating current liabilities.

Accounts payable. $975

Accrued wages and taxes $250

Total operating current liabilities. $1,225

*All the current assets are total operating current assets.

*Calculation for operating working capital:

Total operating current assets. $3,500

Less: Total operating current liabilities. -$1,225

Net operating working capital. $2,275

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