Freiman Corporation's most recent balance sheet and income statement appear below:
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
$\begin{array}{lr}
\text { Sales (all on account)}&\$ 1,310 \
\text {Cost of goods sold. }&780 \
\text {Gross margin. }&530 \
\text {Selling and administrative expense }&359 \
\text {Net operating income }&171 \
\text {Interest expense }& 35 \
\text {Net income before taxes }&136 \
\text { income taxes (30\%)}& 41 \
\text {Net income }& 95
\end{array}$
-The working capital at the end of Year 2 is:
A) $260 thousand
B) $680 thousand
C) $700 thousand
D) $540 thousand

Question

Freiman Corporation's most recent balance sheet and income statement appear below:
  Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
$\begin{array}{lr}
\text { Sales (all on account)}&\$ 1,310 \
\text {Cost of goods sold. }&780 \
\text {Gross margin. }&530 \
\text {Selling and administrative expense }&359 \
\text {Net operating income }&171 \
\text {Interest expense  }& 35 \
\text {Net income before taxes }&136 \
\text { income taxes (30\%)}& 41 \
\text {Net income }& 95
\end{array}$
-The working capital at the end of Year 2 is:
A) $260 thousand 
B) $680 thousand 
C) $700 thousand 
D) $540 thousand

Quizplus · Accepted Answer

Working capital is calculated as current assets minus current liabilities. At the end of Year 2, current assets are $940 thousand and current liabilities are $260 thousand. Therefore, working capital is $940 thousand - $260 thousand = $680 thousand.

Freiman Corporation's Most Recent Balance Sheet and Income Statement Appear