A Level Accounting (9706)•9706/13/M/J/21
Explanation
Working capital is current assets minus current liabilities
Steps:
- Identify current assets from the balance sheet at 31 December 2020.
- Identify current liabilities from the same balance sheet.
- Subtract current liabilities from current assets to get working capital.
- Compare the result to the given choices.
Why B is correct:
- Working capital formula yields $130,000, matching the calculated difference between current assets and liabilities.
Why the others are wrong:
- A subtracts incorrectly, ignoring a key asset.
- C adds non-current items mistakenly.
- D confuses working capital with net profit.
Final answer: B
Topic: Preparation of financial statements
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