Question

In: Finance

Cash $ 298 $ 306 Accounts receivable 3,006 3,422 Inventory 5,210 5,650 Total Current Assets (calculate)...

Cash

$

298

$

306

Accounts receivable

3,006

3,422

Inventory

5,210

5,650

Total Current Assets (calculate)

Net fixed assets

32,780

36,400

Total Assets

$

41,294

$

45,778

Need help with calculating total current assets. Please help me by explaining it trying to learn!

Solutions

Expert Solution

The standard definition for current assets is:

Cash and other assets that are expected to be converted to cash within a year.

They are liquid in nature and are required to meet current liabilities(liabilities occuring within a year) also any unforseen contingencies. Assume you have $100 in current assets and $100 in current liabilities such as rent, taxes. You might to able to pay off them but you will not have any cash to use as working capital.

In the given question, Cash, accounts receivable and inventory are all current assets because they are already in cash or are expected to be converted in cash in less than a year.

For the first column, current assets are =298+3006+5210 = 8514

For the second column, current assets are =306+3422+5650 = 9378

If you see, in both the column if we add current asset and fixed assets together, we get the values 41,294 and 45,778 respectively. This is because in a balance sheet, there are only two groups of asset classes - fixed and current.

Fixed assets are exactly the opposite of current as they are not expected to be converted in cash within a year, but they are used to actually generate income for the business, example -machinery.

P.S- If you have any doubts, please comment.

jeff jeffy answered 1 year ago
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