Question

Medium Sized Retailer’s balance sheet showed total current assets of $195,000, all of which were required in operations. Its current liabilities consisted of $62,500 of accounts payable, $40,000 of 7% short–term notes payable to the bank, and $19,750 of accrued wages and taxes. What was its net operating working capital? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Answer 1

Answer:

Current Liabilities = Accounts Payable + Short term Notes Payable + Accrued wages and taxes
Current Liabilities = $62,500 + $40,000 + $19,750
Current Liabilities = 122,250

Net Operating Working Capital = Current Assets – (Current Liabilities – Notes Payable)
Net Operating Working Capital = $195,000 – ($122,250 - $40,000)
Net Operating Working Capital = $195,000 - $82,250
Net Operating Working Capital = $112,750
Net Operating Working Capital = 112,750