Refer to the following selected financial information from Texas Electronics. Compute the company's working capital for Year 2. $\begin{array}{lrr}& \text { Year 2 } & \text { Year 1 } \
\text { Cash } & \$ 37,500 & \$ 36,850 \
\text { Short-term investments } & 90,000 & 90,000 \
\text { Accounts receivable, net } & 85,500 & 86,250 \
\text { Merchandise inventory } & 121,000 & 117,000 \
\text { Prepaid expenses } & 12,100& 13,500\
\text { Plant assets } & 388,000 & 392,000 \
\text { Accounts payable } & 113,400 & 111,750 \
\text { Net sales } & 711,000 & 706,000 \
\text { Cost of goods sold } & 390,000 & 385,500
\end{array}$
A) $232,700.
B) $220,600.
C) $147,200.
D) $111,700.
E) $142,700.

Question

Quizplus · Accepted Answer

Working capital is calculated as current assets minus current liabilities. Current assets include cash, short-term investments, accounts receivable, merchandise inventory, and prepaid expenses. Current liabilities include accounts payable.Texas Electronics' working capital for Year 2 is calculated as follows:Current assets = Cash + Short-term investments + Accounts receivable, net + Merchandise inventory + Prepaid expensesCurrent assets = $37,500 + $90,000 + $85,500 + $121,000 + $12,100 = $346,100Current liabilities = Accounts payableCurrent liabilities = $113,400Working capital = Current assets - Current liabilitiesWorking capital = $346,100 - $113,400 = $232,700

Refer to the Following Selected Financial Information from Texas Electronics