Wilemon Corporation is preparing its 2010 balance sheet. The company records show the following selected amounts at

Question:

Wilemon Corporation is preparing its 2010 balance sheet. The company records show the following selected amounts at the end of the accounting period, December 31, 2010:

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 current ratio (show computations). Why is working capital important to management? How do financial analysts use the current ratio?

2. Would your computations be different if the company reported $250,000 worth of contingent liabilities in the notes to the statements? Explain.


Contingent liabilities
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...
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