Cauce Corporation is preparing its year-end balance sheet. The company records show the following selected amounts at the end of the year:

Required:
1. Identify current liabilities and compute working capital. Why is working capital important to management?
2. Would your computation be different if the company reported $250,000 worth of contingent liabilities in the notes to its financial statements? Explain.

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Total assets Total noncurrent assets Liabilities: Notes payable (8%, due in 5 years) Accounts payable Income taxes payable Liability for withholding taxes Rent revenue collected in advance Bonds payable (due in 15 years) Wages payable Property taxes payable Note payable (10%, due in 6 months) Interest payable Common stock $530,000 362,000 15,000 56,000 14,000 3,000 7,000 90,000 7,000 3,000 12,000 400 100,000