| Determining Working Capital and the Current Ratio
Wilemon Corporation is preparing its 2007 balance sheet.The company records show the following selected amounts at the end of the accounting period, December 31,2007:
Total assets $695,100
Total noncurrent assets 525,000
Liabilities:
Notes payable(8% due in 5 years) 78,000
Accounts payable 60,000
Income taxes payable 12,000
Liability for withholding tax 3,000
Rent revenue collected in advance 14,000
Bonds Payable (due in 15 years) 100,000
Wages payable 7,800
Property taxes payable 2,000
Note payable (10%, due in 6 months) 10,000
Interest payable 400
Common stock 100,000
1.Compute (a) working capital and (b) the current ratio. Why is working capital important to management? How do financial analysts use the current ratio?
2. Would your computations be different if the company reported $250,000 worth of contingent liabilities in the notes to the financial statements? Explain.
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