223_Hwk_9_Solutions - HA 223 Fall 2006 Homework 9 Solution...

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Unformatted text preview: HA 223 Fall 2006 Homework 9 Solution M92. November 1 Cash (+A)........................................................................ 100,000 Note payable (+L)........................................................ 100,000 December 31 Interest Expense (+E, -SE).............................................. 2,000 Interest Payable (+L)................................................... 2,000 E91. Req. 1 (a) Current assets................................................................. $170,100 Current liabilities: Accounts payable........................................................ $60,000 Income taxes payable.................................................. 12,000 Liability for withholding taxes....................................... 3,000 Rent revenue collected in advance............................. 14,000 Wages payable............................................................ 7,800 Property taxes payable................................................ 2,000 Note payable, 10% (due in 6 months)......................... 10,000 Interest payable........................................................... 400 (109,200) Working capital................................................................ $ 60,900 (b) Current ratio: ($170,100 $109,200) = 1.56 . Working capital is critical for the efficient operation of a business. Current assets include cash and assets that will be collected in cash within one year or the normal operating cycle of the company. A business with insufficient working capital may not be able to pay its short- term creditors on a timely basis....
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223_Hwk_9_Solutions - HA 223 Fall 2006 Homework 9 Solution...

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