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  • Dec 9, 2010, 11:41 AM
    hhuynhly
    Determine Working Capital from a partial balance sheet
    Presented below is a partial trial balance for the Kansas Instruments Corporation at December 31, 2011.

    Account Title Debits Credits
    Cash 21,000
    Accounts receivable 134,000
    Raw materials 31,000
    Note receivable 107,000
    Interest receivable 4,100
    Interest payable 4,700
    Marketable securities 35,000
    Land 46,000
    Buildings 1,270,000
    Accumulated depreciation—buildings 580,000
    Work in process 46,500
    Finished goods 93,000
    Equipment 220,000
    Accumulated depreciation—equipment 124,000
    Patent (net of amortization) 129,000
    Prepaid rent (for the next two years) 66,000
    Unearned revenue 34,000
    Accounts payable 170,000
    Note payable 340,000
    Cash restricted for payment of note payable 73,000
    Allowance for uncollectible accounts 12,200
    Sales revenue 880,000
    Cost of goods sold 540,000
    Rent expense 19,000

    --------------------------------------------------------------------------------

    Additional information:
    1. The note receivable, along with any accrued interest, is due on November 22, 2012.

    2. The note payable is due in 2015. Interest is payable annually.

    3. The marketable securities consist of treasury bills, all of which mature in the next year.

    4. Unearned revenue will be earned equally over the next two years.

    Required:
    Determine the company's working capital at December 31, 2011.

  • Dec 9, 2010, 11:47 AM
    Just Looking

    Working capital is current assets minus current liabilities. Can you identify which items are current assets? Current liabilities? If you'll post your answers, we can check to see that you understand. Thanks.
  • Dec 9, 2010, 12:28 PM
    hhuynhly
    Hi, that's what I'm having trouble with. I think I'm mixing up which are current assets and liabilities.

    Current Assets:
    Cash $21000
    A/R $134,000
    Notes Receivable $107,000 (since it's due 11/22/12 less than a year)
    Interest Receivable $4,100
    Prepaid Rent $66,000 (paid for 2 years, are all prepaid expenses current assets?)
    Marketable Securities $35,000 (mature in the next year)

    Curent Liabilities:
    Current Maturity of long term liability $73000
    Interest Payable $4700
    Unearned Revenue $34000 (does it matter that the additional information says UR is the same each year?)
    Accounts Payable $170000

    Thank you!
  • Dec 9, 2010, 12:46 PM
    hhuynhly
    When I subtract the current asset with current liabilities, I'm not getting the right answer. Can you tell me if my current asset and liabilites are correct?
  • Dec 9, 2010, 01:01 PM
    Just Looking
    Quote:

    Originally Posted by hhuynhly View Post
    Hi, that's what I'm having trouble with. I think I'm mixing up which are current assets and liabilities. Our policy is to check homework only, not do the problem. That's why I asked for your input. You did a pretty good job. See comments below.

    Current Assets:
    Cash $21000
    A/R $134,000
    Notes Receivable $107,000 (since it's due 11/22/12 less than a year)
    Interest Receivable $4,100
    Prepaid Rent $66,000 (paid for 2 years, are all prepaid expenses current assets?) You only count the part that will be consumed within a year.
    Marketable Securities $35,000 (mature in the next year)

    Curent Liabilities:
    Current Maturity of long term liability $73000 The cash restricted is cash that is set aside for a particular use or event. Its classification depends on its purpose and whether that is short or long term. In this case, it is being set aside for paying the note payable. Since that is due in 2015 and is long-term, the restricted cash in long-term.
    Interest Payable $4700
    Unearned Revenue $34000 (does it matter that the additional information says UR is the same each year?) It says it will be earned equally over the next 2 years, meaning $17,000 is due in year one and $17,000 is due in year 2. You only want what will be due in a year.
    Accounts Payable $170000

    Thank you!

    Inventory is also a prepaid expense. Can you identify the accounts above that are inventory accounts?

    The allowance for doubtful accounts is also a current asset (well, contra-asset - but it reduces current assets). Do you understand why?
  • Dec 9, 2010, 01:10 PM
    hhuynhly
    Are the raw material accounts considered inventory?

    So allowance for uncollectible accounts is a current asset also? Does that mean it'll get deducted when I add up all of the current assets?

    I'm just really confused on this problem, thank you for helping.
  • Dec 9, 2010, 01:13 PM
    hhuynhly
    Are raw material, WIP, and finished goods considered an inventory account? There for a current asset? Is there anything else that I'm missing? Thank you!
  • Dec 9, 2010, 01:20 PM
    Just Looking

    The allowance for doubtful accounts is that portion of accounts receivable that the company does not expect to receive, so it does have to be deducted from the current assets.

    You are correct on your list of inventory accounts.

    I think you have it all, but if you want to make corrections and post again I'll double-check to make sure nothing got lost in translation. Thanks.
  • Dec 9, 2010, 01:21 PM
    hhuynhly
    OH! I see, you have to deduct allowances from accounts receivable! I got the right answer! Thank you so much for your help!
  • Dec 9, 2010, 09:05 PM
    ikeprinkess
    I have the same problem! And I can't figure out! Please help me
  • Dec 9, 2010, 09:06 PM
    ikeprinkess
    Can some one please help me! I have the same problem and I'm all confuse

    Presented below is a partial trial balance for the Kansas Instruments Corporation at December 31, 2011.

    Account Title Debits Credits
    Cash 22,000
    Accounts receivable 141,000
    Raw materials 33,000
    Note receivable 114,000
    Interest receivable 3,400
    Interest payable 4,000
    Marketable securities 35,000
    Land 49,000
    Buildings 1,350,000
    Accumulated depreciation—buildings 670,000
    Work in process 42,000
    Finished goods 91,000
    Equipment 360,000
    Accumulated depreciation—equipment 137,000
    Patent (net of amortization) 126,000
    Prepaid rent (for the next two years) 64,000
    Unearned revenue 36,000
    Accounts payable 174,000
    Note payable 410,000
    Cash restricted for payment of note payable 71,000
    Allowance for uncollectible accounts 11,900
    Sales revenue 780,000
    Cost of goods sold 460,000
    Rent expense 26,000

    Additional information:
    1.

    The note receivable, along with any accrued interest, is due on November 22, 2012.
    2.

    The note payable is due in 2015. Interest is payable annually.
    3.

    The marketable securities consist of treasury bills, all of which mature in the next year.
    4.

    Unearned revenue will be earned equally over the next two years.

    Required:

    Determine the company's working capital at December 31, 2011. (Omit the "$" sign in your response.)
  • Dec 9, 2010, 09:17 PM
    ikeprinkess

    Presented below is a partial trial balance for the Kansas Instruments Corporation at December 31, 2011.

    Account Title Debits Credits
    Cash 22,000
    Accounts receivable 141,000
    Raw materials 33,000
    Note receivable 114,000
    Interest receivable 3,400
    Interest payable 4,000
    Marketable securities 35,000
    Land 49,000
    Buildings 1,350,000
    Accumulated depreciation—buildings 670,000
    Work in process 42,000
    Finished goods 91,000
    Equipment 360,000
    Accumulated depreciation—equipment 137,000
    Patent (net of amortization) 126,000
    Prepaid rent (for the next two years) 64,000
    Unearned revenue 36,000
    Accounts payable 174,000
    Note payable 410,000
    Cash restricted for payment of note payable 71,000
    Allowance for uncollectible accounts 11,900
    Sales revenue 780,000
    Cost of goods sold 460,000
    Rent expense 26,000

    Additional information:
    1.

    The note receivable, along with any accrued interest, is due on November 22, 2012.
    2.

    The note payable is due in 2015. Interest is payable annually.
    3.

    The marketable securities consist of treasury bills, all of which mature in the next year.
    4.

    Unearned revenue will be earned equally over the next two years.

    Required:

    Determine the company's working capital at December 31, 2011. (Omit the "$" sign in your response.)

    This is my problem,

    I have
    Current Asset
    Cash 22,000
    A/R 141,000 - 11,900 ( allowance )
    Note Receivable 114,000
    Interest Receivable 3,400
    Prepaid rent 64,000
    Marketable securities 35,000
    Raw materials + WIP + finish goods = 33k+42k+91K = 166k

    Current liabilites:
    Current maturity of long term liability 71,000
    Interest payable 4,000
    Unearn revenue 36,000
    And Account payable 174,000

    so I have 533,500-285,000 = 248,500 But somehow it is not correct. Please help me! What did I do wrong?
  • Dec 10, 2010, 06:28 AM
    hhuynhly
    Prepaid rent is for 2 years, so to count it as a current asset you have to divide it by 2. Do the same thing for Unearned Revenue and take out the Current maturity of long term liability 71,000.

    I hope this helps!

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