[hhuynhly]

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.

[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.

[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!

[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?

[Just Looking]

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?

[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.

[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!

[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.

[hhuynhly]

OH! I see, you have to deduct allowances from accounts receivable! I got the right answer! Thank you so much for your help!

[ikeprinkess]

I have the same problem! And I can't figure out! Please help me

[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.)

[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?

[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!