Cole Company Had the Following Accounts and Balances on December

question 90

Essay

Cole Company had the following accounts and balances on December 31,2017: $$\begin{array} { l r } \text { Income Taxes Payable } & \$ 51,250 \\\text { Cash } & 20,000 \\\text { Notes Payable, 10\%, due June 2, } 2018 & 1,000 \\\text { Accounts Receivable } & 267,500 \\\text { Equipment } & 950,000 \\\text { Accounts Payable } & 104,400 \\\text { Inventory } & 85,000 \\\text { Land } & 600,000 \\\text { Allowance for Doubtful Accounts } & 12,000 \\\text { Discount on Notes Payable } & 150 \\\text { Notes Receivable, maturity 2/1/2024 } & 5,000 \\\text { Current Maturities of Long-Term Debt } & 6,900 \\\text { Unearned Revenue } & 4,320 \\\text { Interest Payable } & 1,010 \\\text { Wages Payable } & 6,000 \\\text { Marketable Securities } & 40,000 \\\text { Capital Stock } & 900,000\end{array}$$
Required
1.Compute Cole's working capital.
2.Compute Cole's current ratio.What does this ratio indicate about Cole's condition?

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Definitions:

Permanent Working Capital

The minimum amount of working capital that a company needs to operate continuously.

Long-Term Debt

Borrowings by a company that are due for repayment after one year or more.

Tax Breaks

A reduction in the amount of taxes that an individual or company owes to the government, often used to incentivize certain behaviors or investments.

Net Working Capital

Net working capital is a financial metric that represents the difference between a company's current assets and current liabilities.