Presented below is the ending balances of accounts for the Kansas Instruments Co
ID: 2585864 • Letter: P
Question
Presented below is the ending balances of accounts for the Kansas Instruments Corporation at December 31, 2016 Account Title Cash Accounts receivable Raw materials Note receivable Interest receivable Interest payable Marketable securities Land Buildings Accumulated depreciation-buildings Work in process Finished goods Equipment Accumulated depreciation-equipment Patent (net of amortization) Prepaid rent (for the next two years) Deferred revenue Accounts payable Note payable Cash restricted for payment of note payable Allowance for uncollectible accounts Sales revenue Cost of goods sold Rent expense Debits Credits 20,000 130,000 24,000 100,000 3,000 5,000 32,000 50,000 1,300,000 620,000 42,000 89,000 300,000 130,000 120,000 60,000 36,000 180,000 400,000 80,000 13,000 800,000 450,000 28,000 Additional information: 1. The note receivable, along with any accrued interest, is due on November 22, 2017 2. The note payable is due in 2020. Interest is payable annually 3. The marketable securities consist of treasury bills, all of which mature in the next year 4. Deferred revenue will be earned equally over the next two years Required Determine the company's working capital (current assets minus current liabilities) at December 31, 2016 (Amounts to be deducted should be indicated by a minus sign.)Explanation / Answer
Calculation of Current Assets
Particulars
Amount
Cash
20,000
Accounts Receivable
130,000
Allowance for uncollectable accounts
(13,000)
Raw Materials
24,000
Note Receivable (To be matured in one year)
100,000
Interest Receivable (To receive with note receivable)
3,000
Marketable Securities (Due within one year)
32,000
Work in progress (Inventory)
42,000
Finished Goods (Inventory)
89,000
Prepaid Rent (Half is due next year, remaining half is non-current)
30,000
Cash restricted for payment of note payable (See Note Below)
0
TOTAL
457,000
NOTE: Cash is restricted for note payable and hence the same is not available for business use till 2020, it is therefore required to be treated as non-current assets.
Calculation of Current Liabilities
Particulars
Amount
Interest Payable (To be paid annually)
5,000
Accounts Payable
180,000
Deferred Revenue (Half of the revenue to be booked in next year hence current)
36,000
Note Payable (to mature in 2020 hence non-current)
0
TOTAL
221,000
Net Working Capital of the company = 457,000 - 221,000 = $236,000
Particulars
Amount
Cash
20,000
Accounts Receivable
130,000
Allowance for uncollectable accounts
(13,000)
Raw Materials
24,000
Note Receivable (To be matured in one year)
100,000
Interest Receivable (To receive with note receivable)
3,000
Marketable Securities (Due within one year)
32,000
Work in progress (Inventory)
42,000
Finished Goods (Inventory)
89,000
Prepaid Rent (Half is due next year, remaining half is non-current)
30,000
Cash restricted for payment of note payable (See Note Below)
0
TOTAL
457,000