Reference no: EM13298722

Diane Corporation is preparing its 2012 balance sheet. The company records show the following selected amounts at the end of the accounting period, December 31, 2012.
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) wDiane Corporation is preparing its 2012 balance sheet. The company records show the following selected amounts at the end of the accounting period, December 31, 2012.
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 quick ratio (quick assets are $70,000). Why is working capital important to management? How do financial analysts use the quick ratio?

2. Would your computations be different if the company reported $250,000 worth of contingent liabilities in the notes to the statements? Explain.orking capital and (b) the quick ratio (quick assets are $70,000). Why is working capital important to management? How do financial analysts use the quick ratio?

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