Flair Corporation is preparing its 2004 balance sheet. The company records show the following related amounts at the end of the accounting period, December 31, 2004:

Required: 1. Compute

(a) working capital and

(b) the current ratio (show computations). Why is working capital important to management? How do financial analysts use the current ratio? 2. Compute the amount of interest expense for 2004 on the long-term note. Assume that it was dated October 1,2004.

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Total current assets $170,100 Total all remaining assets 525,000 Liabilities: Notes payable (8%, due in 5 years) 18,000 Accounts payable 60,000 Income taxes payable 12,000 Liability for withholding taxes 3,000 Rent revenue collected in advance 4.000 Bonds payable (due in 15 years) 100,000 Wages payable 7,800 Property taxes payable 2,000 Note payable (10%; due in 6 months) 10.000 Interest payable 400