The financial statements for Watertown Service Company include the following items: $$\begin{array} { l r r }
& 2017 & 2016 \
\text { Cash } & \$ 46,500 & \$ 41,000 \
\text { Short-term Investments } & 24,000 & 13,000 \
\text { Net Accounts Receivable } & 57,000 & 50,000 \
\text { Merchandise Inventory } & 158,000 & 49,000 \
\text { Total Assets } & 535,000 & 551,000 \
\text { Accounts Payable } & 133,500 & 126,000 \
\text { Salaries Payable } & 17,000 & 20,000 \
\text { Long-term Note Payable } & 57,000 & 50,000
\end{array}$$ Compute working capital for 2017.

Question

The financial statements for Watertown Service Company include the following items: $$\begin{array} { l r r } 
& 2017 & 2016 \
\text { Cash } & \$ 46,500 & \$ 41,000 \
\text { Short-term Investments } & 24,000 & 13,000 \
\text { Net Accounts Receivable } & 57,000 & 50,000 \
\text { Merchandise Inventory } & 158,000 & 49,000 \
\text { Total Assets } & 535,000 & 551,000 \
\text { Accounts Payable } & 133,500 & 126,000 \
\text { Salaries Payable } & 17,000 & 20,000 \
\text { Long-term Note Payable } & 57,000 & 50,000
\end{array}$$ Compute working capital for 2017.

Quizplus · Accepted Answer

Working capital is calculated as current assets minus current liabilities. For 2017, current assets are cash ($46,500), short-term investments ($24,000), net accounts receivable ($57,000), and merchandise inventory ($158,000), totaling $285,500. Current liabilities are accounts payable ($133,500) and salaries payable ($17,000), totaling $150,500. Thus, working capital is $285,500 - $150,500 = $135,000.

The Financial Statements for Watertown Service Company Include the Following