Current Assets and Current Liabilities – 2(Updated)

Solutions:

Problem No. 02

The following items have been identified as Current Asset:

o Cash in Hand
o Cash at Bank
o Accrued Income
o Merchandise Inventory
o Stationery Inventory
o Accounts Receivables
o Notes Receivables
o Unused Stamps.

The following items have been identified as Current Liabilities:

o Bank Overdraft
o Accrued Expenses
o Accounts Payables
o Notes Payables.

The following items are not the components of Current Assets and Current Liabilities:

o Investment
o Long Term Bank Loan
o Trade Marks
o Patent Rights
o Loose Tools
o Vehicles
o Directors’ Fees
o Audit Fees.

Now we may determine the amount of Working Capital and here is the Statement:

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 Meghna Ltd.
Statement showing the determination of Working Capital
Particulars Amount (Tk.)
1. Current Assets:
Cash in Hand 3,00,000
Cash at Bank 2,00,000
Accrued Income 30,000
Merchandise Inventory 5,50,000
Stationery Inventory 60,000
Accounts Receivables 4,00,000
Notes Receivables 2,00,000
Unused Stamps 10,000
Total Current Assets 17,50,000
2. Current Liabilities:
Bank Overdraft 1,50,000
Accrued Expenses 40,000
Accounts Payables 2,50,000
Notes Payables 1,50,000
Total Current Liabilities 5,90,000
3. Working Capital (1 – 2) 11,60,000

Problem No. 04
Workings:

a) Provision for Contingencies:

20% of Gross Working Capital:
Let,
1. Gross Working Capital = Tk.100
2. Therefore, Provision = Tk.20
3. Net Working Capital (1 – 2) = Tk.80
Here, Provision for Contingencies = Tk.(5,00,000 × 20) ÷ 80 = Tk.1,25,000

b) Minimum Working Capital:

Net Working Capital - 10% of Net Working Capital
= Tk.5,00,000 – 10% of Tk.5,00,000
= Tk.5,00,000 – Tk.50,000 = Tk.4,50,000
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 c) Maximum Working capital:
Gross Working Capital + 10% of Gross Working Capital
= Tk.6,25,000 + 10% of Tk.6,25,000
= Tk.6,25,000 + Tk.62,500 = Tk.6,87,500

d) Average Working Capital:

(Minimum Working Capital + Maximum Working Capital) ÷ 2
= Tk.(4,50,000 + 6,87,500) ÷ 2
= Tk.11,37,500 ÷ 2
= Tk.5,68,750

Surma Ltd.
Working Capital Statement
Particulars Taka
1. Current Assets 10,00,000
2. Current Liabilities 5,00,000
3. Net Working Capital (1 – 2) 5,00,000
4. Provision for Contingencies 1,25,000
5. Gross Working Capital (3 + 4) 6,25.000
6. Minimum Working Capital 4,50,000
7. Maximum Working Capital 6,87,500
8. Average Working Capital 5,68,750

Problem No. 05

Required: a)
Current Ratio = Current Assets ÷ Current Liabilities
= Tk.7,50,000 ÷ Tk.4,00,000 = 1.875 i.e., 1.875 : 1
Quick Ratio = Quick Assets ÷ Quick Liabilities
= (Current Assets – Inventory) ÷ (Current Liabilities – Bank Overdraft)
= Tk.(7,50,000 – 1,50,000) ÷ Tk.(4,00,000 – 1,00,000)
= Tk.6,00,000 ÷ 3,00,000 = 2 i. e., 2 : 1

Required: b)
Current Ratio = 2 : 1
Or, Current Assets ÷ Current Liabilities = 2 ÷ 1
Or, Tk.6,00,000 ÷ Current Liabilities = 2 ÷ 1
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Or, 2 × Current Liabilities = Tk.6,00,000 × 1
Or, Current Liabilities = Tk.6,00,000 ÷ 2 = Tk.3,00,000

Working Capital = Current Assets – Current Liabilities

= Tk.6,00,000 – Tk.3,00,000 = Tk.3,00,000

Quick Ratio = Quick Assets ÷ Quick Liabilities

= (Current Assets – Inventory) ÷ (Current Liabilities – Bank Overdraft)
= Tk.(6,00,000 – 1,00,000) ÷ Tk.(3,00,000 – 50,000)
= Tk.5,00,000 ÷ 2,50,000 = 2 i. e., 2 : 1

Required: c)

Working Capital Statement

Particulars Taka
1. Current Assets:
Quick Assets 4,50,000
+ Inventory 2,50,000
Total Current Assets 7,00,000
3. Current Liabilities:
Quick Liabilities 2,50,000
+ Bank Overdraft 1,50,000
Total Current Liabilities 4,00,000
5. Working Capital (1 – 2) 3,00,000

Current Ratio = Current Assets ÷ Current Liabilities

= Tk.7,00,000 ÷ Tk.4,00,000 = 1.75 i.e., 1.75 : 1

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