Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios.

-The total amount of working capital for National Textile is
A)$2,000.
B)$6,000.
C)$4,000.
D)$30,000.

Question

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. 
 
-The total amount of working capital for National Textile is
A)$2,000. 
B)$6,000. 
C)$4,000. 
D)$30,000.

Quizplus · Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. 
Current assets = $35,000 (cash) + $9,000 (accounts receivable) + $6,000 (inventory) = $50,000 
Current liabilities = $36,000 (accounts payable) + $10,000 (short-term notes payable) = $46,000 
Working capital = $50,000 - $46,000 = $4,000. Thus, the correct answer is C.

Use This Balance Sheet and Income Statement to Answer the Following