Prezas Company\'s balance sheet showed total current assets of $3,250, all of wh

Question

Prezas Company's balance sheet showed total current assets of $3,250, all of which were required in operations. Its current liabilities consisted of $975 of accounts payable, $600 of 6% short-term notes payable to the bank, and $250 of accrued wages and taxes. What was its net operating working capital?

Question 1 options:

$2,025

$2,309

$1,721

$1,620

$1,701

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Question 2 (10 points)

Brown Fashions Inc.'s December 31, 2014 balance sheet showed total common equity of $4,050,000 and 290,000 shares of stock outstanding. During 2015, the firm had $450,000 of net income, and it paid out $100,000 as dividends. What was the book value per share at 12/31/15, assuming no common stock was either issued or retired during 2015? (Round your final answer to two decimal places.)

Question 2 options:

$13.96

$18.51

$15.17

$11.53

$14.11

$2,025

$2,309

$1,721

$1,620

$1,701

Explanation / Answer

Q1

Answer is A

Current Operating Assets = 3250

Current Operating liabilities = Accounts payable + accrued wages and taxes

(Interest bearing liabilities are not part of operating activities so will not include here)

Current Operating liabilities = 975 + 250 = 1225

So Net Operating Working Capital = 3250 - 1225 = 2025

Q2

Answer is C

Common Equity in 2014= 4,050,000

Number of shares outstanding 2014 = 290,000

Net income during 2015 = 450,000

Dividend paid = 100,000

Retained earnings = 450,000 - 100,000 = 350,000

This retained earnings will get added to shareholder's equity to find new equity in 2015

So

Common Equity in 2015= 4,050,000 + 350,000 = 4400,000

Number of shares = 290,000

Book value per share = 4400,000 / 290,000 = 15.17

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