Diane Corporation is preparing its 2012 balance sheet. The company records show the following selected amounts at
Question:
Diane Corporation is preparing its 2012 balance sheet. The company records show the following selected amounts at the end of the accounting period, December 31, 2012:
Total assets ............ $530,000
Total noncurrent assets ....... 362,000
Liabilities:
Notes payable (8%, due in 5 years) .. 15,000
Accounts payable ......... 56,000
Income taxes payable ......... 14,000
Liability for withholding taxes ..... 3,000
Rent revenue collected in advance .... 7,000
Bonds payable (due in 15 years) ... 90,000
Wages payable ........... 7,000
Property taxes payable ........ 3,000
Note payable (10%, due in 6 months) . 12,000
Interest payable ............ 400
Common stock .......... 100,000
Required:
1. Compute (a) working capital and (b) the quick ratio (quick assets are $70,000). Why is working capital important to management? How do financial analysts use the quick ratio?
2. Would your computations be different if the company reported $250,000 worth of contingent liabilities in the notes to the statements? Explain.
A contingent liability is an obligation of business related to an uncertain future event. The business must record it in its financial statements if the amount can be reliably estimated and it is probable that amount will be paid by business as a... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Req 1 a Current Assets 168000 Current liabilities Accounts payable 56000 Income taxes payable 140...View the full answer
