M$9-5$

LO$9-4$

Reporting Contingent Liabilities

Buzz Coffee Shops is famous for its large servings of hot coffee. Last year a customer spilled a cup of hot coffee on himself and decided to file a lawsuit against Buzz for $$1,000,000.$ Buzz's management thinks the chances of the company having to pay anything to the customer are remote. The case went to trial this year, and Buzz was found guilty of serving hot coffee in the wrong type of cup. The judge ordered Buzz to pay the customer $$200,000.$ What is the proper reporting of the lawsuit in each year?

M$9-6$

LO$9-5$

Computing Working Capital

The balance sheet for Yakima Corporation reported the following: noncurrent assets, $$240,000$; total assets, $$360,000$; noncurrent liabilities, $$176,000$; total stockholders' equity, $$94,000.$ Compute Stevenson's working capital.

M$9-7$

LO$9-5$

Analyzing the Impact of Transactions on Working Capital

Ospry Company has working capital in the amount of $$1,240,000.$ For each of the following transactions, determine whether working capital will increase, decrease, or remain the same.

a$.$ Paid accounts payable in the amount of $$50,000.$

b$.$ Recorded accrued salaries in the amount of $$100,000.$

c$.$ Borrowed $$250,000$ from a local bank, to be repaid in $90$ days.

d$.$ Purchased $$20,000$ of new inventory on credit.