T Normal T No Spac... Heading 1 Heading 2 Paragraph 1. Use the following items t
ID: 2782297 • Letter: T
Question
T Normal T No Spac... Heading 1 Heading 2 Paragraph 1. Use the following items taken from the financial staternents of the Postal Service for the year ending December 31, 2012 to answer questions 5: S 10,000 11,000 Accounts payable Accounts receivable Accumulated depreciation-equipment Advertising expense Cash Owner's capital (1/1/12) Owner's drawings Depreciation expense Insurance expense Note payable, due 6/30/13 Prepaid insurance (6-month policy) Rent expense Salaries and wages expense Service revenue Supplies Supplies expense Equipment (Long-term 28,000 21,000 14,000 105,000 14,000 12,000 3,000 5,000 6,000 17,000 32,000 125,000 4,000 6,000 210,000 What is the Working Capital of the Postal Service at December 31, 2012?Explanation / Answer
Current assets = Cash in Hand + Cash at Bank +Sundry debtors+ Bills receivable+Marketable securities+ Other short term investments+ Inventory +Prepaid expenses
Current Liability = Sundry creditors or Accounts Payable+Outstanding and accrued expenses+Income tax payable+Unclaimed dividend and Bank Overdraft + Outstanding expenses
Working capital = Current Assets - Current Liabilities
Current Assets = Cash and Accounts Receivable = 11000+14,000 =25,000
Current Liabilities = Accounts Payable = 10000
Therefore Working capital = 25000-10000 = 15,000
Notes payable are classified as current liabilities when the amounts are due within one year of the balance sheet date but in the problem given, the notes payable comes in the next year. Hence it is considered as non current liabilitity.
Generally prepaid insurance is considered as current assets but in this problem the policy is taken for 6 months. The entire economic benefit is achieved within this year so, it is not considered as current asset.
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