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21 May, 14:18

Bonner Collision has shareholders' equity of $141,800. The firm owes a total of $126,000 of which 60 percent is payable within the next year. The firm net fixed assets of $161,900. What is the amount of the net working capital

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  1. 21 May, 17:08
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    The amount of the net working capital is $55,500

    Explanation:

    The net working capital is calculated by the following formula:

    Net working capital = Current assets - Current liabilities

    The firm owes a total of $126,000 of which 60 percent is payable within the next year.

    Current liabilities = Total liabilities - liabilities paid in next year = $126,000 - 60% x $126,000 = $50,400

    Basing on accounting equation:

    Total assets = Total liabilities + shareholders' equity = $126,000 + $141,800 = $267,800

    Current assets = Total assets - fixed assets = $267,800 - $161,900 = $105,900

    Net working capital = $105,900 - $50,400 = $55,500
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