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3 September, 05:59

Use the information below for Privett Company to answer the question that follow. Privett Company Accounts payable $ 30,000 Accounts receivable 35,000 Accrued liabilities 7,000 Cash 25,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 100,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 20,000 Property, plant, and equipment 400,000 Prepaid expenses 2,000 Based on the data for Privett Company, what is the amount of working capital? a.$113,000 b.$213,000 c.$39,000 d.$153,000

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  1. 3 September, 09:22
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    A. $113,000

    Explanation:

    Working capital is the difference between current asset less current liabilities.

    Working capital = current asset - current liabilities.

    Let's just determine how much is the current asset first.

    Accounts receivable $35,000

    Cash $25,000

    Inventory $72,000

    Marketable securities $36,000

    Prepaid expenses $2,000

    Total current assets $170,000

    Next, let's compute how much the current liabilities are,

    Accounts payable $30,000

    Accrued expenses $7,000

    Notes payable (short-term) $20,000

    Total current liabilities $57,000

    Now, we can compute the working capital.

    Working capital = $170,000 - $57,000

    =$113,000

    *Intangible assets, long term investments and property & equipment are all non-current assets.

    *Long-term liabilities is also a non-current liability, therefore excluded in the computation.
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