Question

Related to Checkpoint 3.2) (Working with the balance sheet) The Caraway Seed Company grows heirloom tomatoes and sells their seeds. The heirloom tomato plants are preferred by many growers for their superior flavor. At the end of the most recent year the firm had current assets of

$ $48,700 ,net fixed assets of $250,400 ,current liabilities of $28,600 ,and long-term debt of $99,700.

a. Calculate Caraway's stockholders' equity.

b. What is the firm's net working capital?

c. If Caraway's current liabilities consist of $19,200 in accounts payable and $9,400

in short-term debt (notes payable), what is the firm's net working capital?

Answer 1

Answer to Part a.

Total Assets = Total Liabilities + Total Stockholders’ Equity
Total Assets = Current Assets + Net Fixed Assets
Total Assets = $48,700 + $250,400
Total Assets = $299,100

Total Liabilities = Current Liabilities + Long term Debt
Total Liabilities = $28,600 + $99,700
Total Liabilities = $128,300

Total Assets = Total Liabilities + Total Stockholders’ Equity
$299,100 = $128,300 + Total Stockholders’ Equity
Total Stockholders’ Equity = $170,800

Answer to Part b.

Net Working Capital = Current Assets – Current Liabilities
Net Working Capital = $48,700 - $28,600
Net Working Capital = $20,100

Answer to Part c.

Net Working Capital = Current Assets – Current Liabilities
Net Working Capital = $48,700 - $28,600
Net Working Capital = $20,100

Net Working Capital will remain same, as it will not change with what forms the part of Current Liabilities.